IVA Pros and Cons

An IVA has lots of benefits and is a great way to clear your debt. It is important however that you are aware of all the pros and cons of an IVA.

IVA Pros

An IVA can make you debt free within just 60 months. An IVA lasts for a fixed time period, typically only 5 years. However, if you are a homeowner your IVA may last 6 years.

An IVA will consolidate all your debts to one affordable monthly payment. Before your IVA starts a monthly payment plan is agreed based on your individual financial situation. Check out How much does an IVA cost? to find out more.

Your IVA is a legally binding agreement. All creditors are legally bound by the IVA. Everything is made clear and you will know exactly when you will be debt free again.

An IVA will eventually stop all threatening calls and payment demands. Once your IVA has been accepted you may receive calls until the creditors system updates. These days often statements are automatically generated and it may take some time for the systems to be updated. Don’t worry, if you do continue to receive letters pass them onto your appointed IVA supervisor who will deal with them for you.

Creditors will not be able to take court action against you for any debt covered by your IVA. When your IVA is agreed, your creditors are not allowed to take further legal action against you on the condition that you stick to the terms of your IVA.

Your IVA will freeze all interest and late payment charges. Once your IVA has been set-up, by law your creditors are not allowed to add further charges or interest to any of the accounts covered by your IVA.

After your IVA your credit rating will be repaired. On successful completion of your IVA, you will be allowed to borrow money and your credit rating will begin to improve. Taking an IVA will not black list you for life.

Your IVA remains private. If you take an IVA, it remains private between you and your creditors. It is not advertised in the local papers. However your name can be found in the insolvency register.

An IVA can protect your job.

IVA Cons

To get an IVA you should have a minimum level of debt. An IVA is not a viable option unless you have at least £15,000 debt. You will also need to be able to afford a monthly payment of at least £180.

The IVA may require you to release equity in your home. If you have any equity in your property or other significant valuable assets, you may be required to release part of this for the IVA.

The IVA will not permit you to make any unsecured borrowing during the agreement. This means you will not be able to use store or credit cards for the duration of the IVA. You will be able to use pre paid cards.

IVAs do damage credit rating but not as bad as with bankruptcy. You may find for a short while after your IVA it is difficult to get credit. From the start of your IVA for a period of up to 6 years your credit rating will be affected. On completion of your IVA you can send your certificate of completion to the credit agencies for it to be noted on your file.

An IVA lasts for 5 years while bankruptcy only lasts for 3. With an IVA you do pay back between 40%-50% of your debt. With bankruptcy you pay back a minimum amount (which could be as little as 0).

An IVA is different to a debt management plan. An IVA is one agreement that has to be agreed by over 75% of the creditors, by debt value, voting on the day of your creditors meeting.

To talk further about the Pros and Cons of an IVA please fill out the contact form or call us on 0161 763 2670.