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IVA Advantages and Disadvantages

There has been much press about IVAs in recent years, and it can be baffling at times trying to work out what the value of any such measure actually is. There are a specific set of circumstances in which an IVA is a truly effective measure in dealing with financial troubles, but IVAs are not appropriate for everyone.

Your Insolvency Practitioner is best placed to advise you as to whether an IVA is right for you, but there are a few facts to bear in mind if you’re considering one.

Advantages of an IVA

Debts are frozen

One of the advantages of an IVA is to help with debts that are spiralling out of control. The IVA will propose that you pay a portion of the debt back over the IVA period. This means that you no longer have to worry about creditors enforcing charges or changes to your agreement, as they will be bound to the terms of any IVA they have accepted.

Legal action prevented

When you first seek an IVA your IP will apply for an Interim Order. This stops creditors from taking legal action against you for your debts while the IVA process is being carried out. Once the IVA proposal has been accepted by the creditors, they are legally prevented from pursuing your debts through the courts.

Debts cleared at the end of the term

Providing you manage to stick to the IVA agreement, at the end of it your debts will be considered settled, and you can finally move on from them.

Manageable payments

An IVA is designed to give you a realistic chance at clearing your debt obligations. For this reason your IP will help you to come up with a suggested payment plan that is realistically manageable for you.

Mediation

Your IP will handle all mediation between you and your creditors, meaning that you don’t have to worry about the stress of trying to negotiate with them, or about receiving intimidating correspondence from them.

Security

An IVA is a binding legal contract for you and for your creditors. This gives you the security of knowing that they cannot change their minds and start hassling you for the debts.

Disadvantages of an IVA

No guarantee creditors will accept

There is no guarantee that creditors will vote to accept your IVA proposal, but they do tend to be amenable to them. This is because creditors tend to recoup more of their borrowing via IVAs than bankruptcy.

No further credit during the term

During your IVA, you won’t be able to get further credit, however this gives you a better chance to really get on top of things.

Only unsecured debt

IVAs are only intended for unsecured debt, and do not normally cover secured debts such as mortgages or secured loans.

If you fail to make the payments

If you don’t manage to make the payments your IVA may fail, leaving you exposed to legal action from your creditors. However, this should be less likely to occur if you and your IP work out a good proposal in the first place.

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