It’s impossible to say whether or not an IVA is the best possible option in any particular situation, which is why you really need to seek the advice of an expert if you’re considering one. If your debt situation is at the point where you really can no longer manage it, you should speak to an Insolvency professional as soon as possible to work through your options.
Settle your debts
An IVA is basically a way to settle your debts when you cannot meet the terms of your existing agreements with your creditors.
IVAs are not a way to have your debts written off, although typically an IVA will involve paying only a portion of the debt back.
Avoid bankruptcy
One of the primary advantages to using an IVA is that it can help to avoid bankruptcy, and the host of issues that go with it. When you consult the services of an Insolvency Practitioner, which you will need to do if you’re looking to potentially use an IVA, they will consider your options and advise you on the pros and cons of each.
Options
Your IP will go through your finances, taking into account your income, total debts, other outgoings, and any assets that you have. They will use this information as the basis for the advice that they give you. An IP may well advise you to go for an IVA, in which case they will handle the negotiations and legal processes involved.
Consequences
Another advantage to using an IVA is that it avoids the seriousness of the impact that bankruptcy has on your credit rating. Because with an IVA you are essentially maintaining the responsibility for your debts, and are effectively settling them in a reduced way, your credit rating can be repaired over time. While the IVA is running, you will not be able to get further credit, but once it has elapsed you will indeed be able to seek it again. An IVA is therefore a way to work towards a more stable financial future within just a few years.
Costs
If the alternative to your IVA is bankruptcy, it’s also worth bearing in mind that the costs of bankruptcy are generally higher. IVAs do not incur the statutory costs that bankruptcy does, although naturally you still have to deal with your debts if you use an IVA.
Payments
One of the deciding factors in whether an IVA will be an option for you is whether you can actually afford to make payments towards it. If you have sufficient income, then an IVA may be the best way to deal with your debts, and has the best outcome for your future solvency.
Protection
If your creditors are either threatening or carrying out legal action against you, an IVA will also be helpful in that it stops these processes. While the IVA is being drawn up, an Interim Order prevents any court action against you, and once the IVA is accepted, the creditors cannot pursue you either.