What-Should-I-Consider-Before-Entering-An-IVA

What Should I Consider Before Entering An IVA?

IVA debt solution

An Individual Voluntary Arrangement, or IVA, is a formal debt solution that can be used to repay your creditors over an agreed period of time. An IVA can help you to get your finances back on track. However, as a legal agreement, it is important you ask yourself first “what should I consider before entering an IVA?”

What should I consider before entering into an IVA: the Advantages

There are advantages and disadvantages to consider before entering an IVA. Some of the benefits include:

  • Repaying your debts over a fixed period of time, usually five years
  • Only repaying what you can afford each month, based on your income and outgoings
  • An IVA will freeze interest on your debts, leaving you with a fixed sum to pay each month
  • Your creditors will no longer be able to contact you or take further action against you once an IVA has been set up.  So, essential assets such as your home will be protected.
  • At the end of the IVA, any remaining debt included in the agreement will be written off

What should I consider before entering into an IVA: the Disadvantages

One of the main disadvantages of an IVA is having a negative impact on your credit rating. This means that it may be more difficult for you to obtain credit in the future.

Another downside of an IVA is that it can be costly. You will need to pay fees to set up the arrangement and to your insolvency practitioner (IP). Repayments will then be made to your IVA provider. They will in turn then distribute the money amongst your creditors.

Releasing equity in your home can be a necessity to raise funds to repay creditors. That means that you could end up losing your home if you fail to make the repayments.

Selling certain assets, such as a second home or valuable car, is often required to raise funds to repay your creditors.

Entering into an IVA should be a last resort as it is a legally binding agreement. This means that if you fail to keep up with the repayments, you could face serious legal consequences.

How do I get an IVA?

If you are thinking of entering into an IVA, you must seek professional advice first. An experienced insolvency practitioner will be able to advise you on whether an IVA is the right option for you.

Entering into an IVA is a big decision and one that you should not be taking lightly. If you are struggling to repay your debts, it is essential to seek professional advice. This will ensure you make an informed decision about what is best for you. An experienced IP will also be able to guide you through the process.

When you are looking for an insolvency practitioner to help you with your IVA, it is essential to choose one that is regulated by the Insolvency Practitioners Association (IPA).

The IPA is the professional body that regulates insolvency practitioners in the UK and sets standards that they must adhere to. This means that you can be sure that your insolvency practitioner is qualified and experienced to a satisfactory level. You can find a list of certified insolvency experts in the UK on the IPA website.

How long does an IVA last?

An IVA can last up to five years, although completing it in three years is usually achievable. Outstanding debt at the end of the agreement will be written off meaning you’ll will no longer be liable for this debt.

Can I clear my IVA early?

If you keep up with the repayments and make all of the agreed payments, you will be able to clear your debt early. Paying off an IVA early will incur fees, so it is essential to speak to your insolvency practitioner about this before making any decisions.

Difference between IVA and a debt management company?

Debt management companies are businesses that offer to help people repay their debts. They will work with creditors to try and agree on a repayment plan that is affordable for the debtors.

Similar to an IVA, the debt management company will collect the monthly payments from the debtors and distribute the money amongst the creditors.

There are a number of advantages of using a debt management company. First, it can be easier to negotiate with creditors when you have someone else doing it on your behalf and the debt management company will be able to set up a repayment plan that is affordable for you. And third, the debt management company can help you to stay organised and on track with your repayments.

 

Disadvantages of debt management companies

However, there are also some disadvantages to using a debt management company. First, you will likely have to pay fees to a debt management company for their services. Second, your creditors may not agree to the repayment plan that the debt management company proposes. And third, if you miss any of the repayments, the debt management company could take legal action against you.

When it comes to choosing between a debt management company and an IVA, it is important to weigh up all of the pros and cons before making a decision. An IVA can be a good option if you are struggling to repay your debts.  Being aware of the risks involved is crucial. With a debt management company, you may have to pay fees, but you may find it easier to negotiate with your creditors.

As a legally-binding agreement, creditors cannot take further action against you once an IVA has been agreed. When using a debt management company, there remain routes for further legal action. Ultimately, the decision of whether to use a debt management company or an IVA will come down to your individual circumstances.

Summary

Overall, an IVA can provide a way for you to repay your debts over a period of time and can help you to avoid bankruptcy. It is vital you are fully aware of the agreement you are entering and its potential disadvantages. As a legally binding agreement, there can be serious ramifications if you cannot maintain the agreed repayments. This will harm your credit rating going forward. Asking yourself what you should consider before entering an IVA is therefore essential.

Always consult an insolvency expert to check if an IVA is the best solution for your specific needs and circumstances.

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