The Advantages & Disadvantages of the IVA

What are the Pros & Cons of the Individual Voluntary Arrangement?

Nov 2, 2009

What are the Advantages & Disadvantages of an IVA?, lusi

Those with significant debt problems often consider an IVA. What are the pros & cons of an Individual Voluntary Arrangement? Where is the best place to find IVA help?

In recent years many UK consumers have been given an effective debt management solution with the IVA (Individual Voluntary Arrangement). This debt management solution bears some similarities to bankruptcy but may not have such negative effects. What are the pros and cons?

The Advantages of Using an IVA to Control Debts

Like any debt management solution, the IVA has both advantages and disadvantages that an individual should consider before deciding to take this route. The main benefits are:

Debt repayment may become more affordable. The individual will have a regular monthly repayment to make for the term of their agreement. They can also look at a lump sum payment if this suits them better.
Borrowings will be written off at the end of the IVA (usually after 5 years) even if they are not fully repaid.
The individual is less likely to lose their assets and their home as they would with bankruptcy.
Creditors can't chase their debts once an IVA is in place (as long as its terms are met) and interest/charges will be frozen.

For many this solution allows them to get their finances back under control and to take responsibility for their debts without being forced to liquidate assets. But, there are some downsides to this solution as well.

The Disadvantages of the IVA

Before choosing this solution the individual may want to think about the negative aspects of an IVA. These include:

The IVA will stay on the individual's credit record for a number of years (usually around 6). This could make it harder for them to get approval for future credit products.
The individual has to get agreement from creditors (based on 75% of debt value) for the agreement to go through.
They will have to pay for an Insolvency Practitioner to take on their agreement's arrangement and management. Fees here will often be added to the overall debt.
There is no guarantee that their home/assets will be unaffected as the IVA progresses. They may be asked to secure a loan against equity in their home, for example, to go towards their overall debt repayment.

Bear in mind that there are certain qualifying conditions for an IVA. Those that don't meet these conditions may be able to look at a Debt Relief Order (DRO) as an alternative. In either case it may well be worth taking independent debt management advice before deciding what to do. This could help the individual find the best overall debt management solution.

The copyright of the article The Advantages & Disadvantages of the IVA in Personal Debt Management is owned by Carol Finch. Permission to republish The Advantages & Disadvantages of the IVA in print or online must be granted by the author in writing.