Is an IVA Worth It? | Individual Voluntary Arrangement Pros and Cons

Though it is undeniably a well-liked debt solution, with safeguards against creditor legal action and a defined schedule for paying off the remaining debt, IVAs are not the best debt solution for everyone.

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It is important to remember that your unique circumstances will determine whether any debt solution is good for you.

In this IVA article, we will be discussing all things IVA and how different IVA affect your lifestyle and current financial situation if you choose to take the plunge.

What is an IVA?

An individual voluntary arrangement is a written and legally enforceable agreement between you and your creditors to repay your obligations over a period of time (IVA). This implies the court has authorised it, and your creditors must follow it.

An IVA may be tailored to your specific requirements, but it can be costly and considered dangerous. For more information about IVAs, you can click here.

A qualified individual, known as an insolvency practitioner, must set up an IVA. A lawyer or an accountant will be the person in charge of this. The insolvency practitioner will charge the IVA. These are frequently high and are calculated depending on the amount you repay through the IVA. Throughout the IVA, your creditors are dealt with by the insolvency practitioner.

Before you go to a debt management company for an IVA, find out how much they will charge. Because they charge a fee in addition to the insolvency practitioner’s costs, a debt management business is likely to be more expensive.

If you want to know whether or not you qualify for an IVA, you can get in touch with us for help.

IVA Pros

An IVA can shield you against creditors taking legal action against you, such as filing for bankruptcy or filing a court application for payment failure. How an IVA can benefit or detriment is usually dictated by your current financial situation. Here are some of the advantages you can get if you pick an IVA as your debt solution.

You only need to pay what you can afford

Before you pay your IVA, your day-to-day living expenses will be considered. When you owe money and choose to pay with an IVA, no matter the amount of money owed, you can still feel safe that you can get by. Your insolvency practitioner will budget out your expenses to balance them with this debt solution in the form of monthly payments or as a lump sum payment.

Creditors legally cannot bother you for payments

Once your creditors have agreed to your IVA plan, they are legally bound by it and cannot approach you directly for payment. Your Insolvency Practitioner and their employees, on the other hand, will administer the IVA and deal with creditors on your behalf.

The debt management plan you set up and handled by your IP will include the monthly repayments to your creditors.

An IVA Protects your Assets

Typically, your house or automobile assets are safeguarded during an IVA, allowing you to keep them if they are of fair worth. This protection makes an IVA the most of the other debt solutions in the market. This asset protection means you can still use your assets in your day to day life.

The amount you pay is a fixed rate

Knowing that your debt amount is fixed, you will make an affordable debt payback. Once the IVA is authorized, creditors cannot apply further charges or add interest to your obligations. The amount included in your monthly payments is set and easier to monitor for you, your IP, and the creditor.

Your Debts will be written off

The majority of IVAs are for five to six years. Any leftover unsecured debt will be wiped off when completed the project. THis

Cons of an IVA

As with all kinds of tools, an IVA still has disadvantages that you should carefully consider.

An IVA will affect your credit rating

An IVA will negatively influence your credit score, for it will be recorded on your credit file and will typically be there for six years after it has been approved. Because an IVA normally lasts for five years, it will most likely be on your credit history for another year after you have completed it. As a result, future loans and other financial instruments will most likely be difficult to come by.

IVAs are Listed on a Public Database

When creditors approve an IVA, it is entered into the Insolvency Register, which is a public database. Anyone may use this to search. However, in practice, only a small percentage of individuals will adopt this approach.

An IVA may impact any future income or assets you receive. If you decide to sell your house while you have an IVA, you may be obliged to pay all of the revenues into the IVA.You must notify your insolvency practitioner if your income rises while under an IVA.

You Will Need to Budget

Payments to the IVA are required. Despite the agreement’s flexibility, you’ll need to plan for the next few years to ensure that you keep making payments.

Your creditors will be presented with a proposal before an IVA takes place. Unless you have a lump sum IVA, you will make monthly payments towards the IVA for 60 or 72 months if they consent to the IVA. You’ll make a one-time higher payment into your IVA if you have a lump sum IVA.

Homeowners may need to release equity from their property

As part of the arrangement, you may be asked to relinquish equity from your house. If this is not practicable, your IVA may be extended from five to six years. If you owe money to more than one creditor or have accrued at least two debts, an IVA may still be a good option for you.

In the great majority of circumstances, creditors will not demand that you sell your home. Instead, they will demand that a condition is known as the ‘equity clause’ be introduced to your IVA.

If you keep up repayments on the mortgage and any other debts secured on the property, it will not be sold against your will as long as you keep up repayments on the mortgage and any other obligations secured on it. If you have equity in your home at the end of the fifth year of your IVA, the provision will require you to try to re-mortgage – or take out a secured loan – on it.

What types of debt can you include in an IVA?

If you have secured debts (those that threaten to cause you to lose your house if you don’t make payments), an IVA may not be worth it. A mortgage is the most apparent example of a secured loan, although secured personal loans, credit cards, and other options are also available.

An IVA is so far a great debt solution for unsecured debts like:

Benefit Overpayments
Catalogue Debts
Credit Cards
Council Tax Arrears
Income Tax and National Arrears
Overdrafts
Pay Later Debts
Payday Loans
Personal Loan
Store Debts
Utility Arrears
Outstanding Debts

When should you consider an IVA?

IVA payments are often times great debt management solutions for most people, but this is not always the case. There are certain instances when you can consider getting an IVA.

For starters, submitting an IVA would be the best option if you owe £5,000 to £10,000 (or more) and are in financial difficulty.

It is also a great option to consider if you are facing debt-related legal action and wish to halt it if you need to defy a court order to have bailiffs come to your house or withdraw money from your bank account to pay your obligations, or if the expenses for your IVA do not outweigh the money you’ll save by not having to pay off your entire debt

An IVA proposal may also be best if you do not qualify for a Debt Relief Order because you have too many assets, but you want to avoid bankruptcy.

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Do I qualify for an IVA?

Many factors dictate whether or not you qualify for an IVA. If you want an easier way to find out if you qualify for an IVA, you can get in touch with us, and we will let you know if an IVA is suitable for you.

Basically, to qualify for an IVA, you have to make monthly instalments. It would be best if you also had unsecured debts totalling more than £6,000 owed to various creditors. Lastly, you need to live in the United Kingdom, Wales, or Northern Ireland.

Do I need an insolvency practitioner?

Unlike some other debt alternatives, such as bankruptcy or a debt management plan, you will need the help of an Insolvency Practitioner to file for an IVA (IP). Solicitors or accountants, who have experience dealing with debt, will often prepare proposals that tell your creditors how much money they can expect to receive and any terms to which you (the debtor) and they will be bound for the duration of the arrangement.

Your Individual Voluntary Arrangement will be up and running if the creditors hold 75% of your debt agreement. Your IP should be the primary point of contact between you and your creditors, as they will be in charge of distributing your repayments and overseeing the continuing administration of your IVA. While not being able to apply yourself may appear inconvenient, the engagement of an insolvency practitioner might be an enticing aspect for individuals who do not want to deal directly with their creditors.

How to Apply for an IVA

You will need to figure out how to set up an IVA once you have made your decision. The first thing to do is find an insolvency practitioner who can help you with your situation. You can quickly check up on an IP address. After you have chosen an IP, they’ll go to court on your behalf and get an interim injunction. While you are putting together your IVA proposal for your creditors, this injunction will shield you from them. It will stop them from pursuing legal action against you while putting everything in place.

Then you and your IP will sit down and examine your financial status. They will assist you in drafting a proposal that is acceptable to your creditors and affordable to you.

Following that, your IP will call a creditors’ meeting in their office to convey the conditions of your IVA to them. If 75% of your creditors agree to your plan, it will be approved, and your IVA will be implemented. For a more detailed look into the process of applying for an IVA, click here.

https://www.best-companies.co.uk/how-to-apply-for-an-iva/

Will my job be affected by an IVA?

The best way to learn if your job will be affected by an IVA is by checking your employment contract. You can also meet with a representative from your professional membership organisation or your HR officer discreetly. You can also contact a representative from your labor union.

However, certain jobs and careers are automatically affected once you enter into an IVA. These are roles in:

Finance
Law
Property
Accountancy

Can I keep my Car on an IVA?

Depending on the value, you should be able to keep your car even after you enter into an IVA. Your insolvency practitioner will appraise the vehicle to determine its value. . If your automobile is worth a lot of money, the IP may question if you need it, or your creditors may ask you to sell it. If the creditors or your IP requested to sell your automobile, you would almost always be given some money to get a new one.

If you own two or more automobiles, you may be required to justify your possessions to the IP. If you have an additional automobile that you don’t need, you may sell it and use the proceeds to pay down your IVA.

Summary

An individual voluntary arrangement (IVA) as a legally binding agreement is a great way to get on top of your financial circumstances and overcome financial difficulties. It is a flexible and safe solution to your debt problems, adjusting the repayment period and considering how much debt you have to settle. All in all, if you fit the requirements, an IVA is definitely worth taking.

We can help you find out if you qualify for the IVA – all you have to do is get in touch with us.

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IVA Debt Help Information

If you want to know more about the debt help plan of an IVA we have all articles related to individual voluntary arrangements here: