Pros And Cons Of Entering Into An IVA

pros cons entering into iva individual voluntary agreement

It is already challenging enough to admit you have a debt problem and resolve to do something about it. Things can get even more confusing when you decide which debt repayment method is best for you. 

An IVA, Individual Voluntary Arrangement, is like any other debt solution in its benefits and drawbacks. In this piece, we will go over the advantages and disadvantages of IVAs, so you can decide whether it is the right choice for you. 

Let's define an IVA before discussing its benefits and drawbacks. 

Definition Of An IVA 

An Individual Voluntary Arrangement, IVA, is an arrangement between yourself and the businesses or individuals you owe credit to. 

It is available to people in Northern Ireland, England, and Wales and lets them make one affordable monthly payment toward their financial obligations for over five years. 

For the duration of your IVA, you will not accrue any new interest or fees on the debt you owe, and your creditors will not attempt to contact you to collect past-due payments—an IVA gives you time to settle your debts without constant harassment from collectors. 

However, if you decide to enter an IVA, you will add your details to the Bankruptcy Register. Your IP will record your agreement in the Personal Bankruptcy Register, where creditors and other interested parties can review your financial records for free. 

Advantages Of An IVA 

1. Debt Cancellation 

Many people feel like they are sinking under the weight of their debts before pursuing an IVA, and it can be difficult to imagine a future when things are more manageable. 

In contrast, an IVA may ease the way to debt freedom. 

An IVA's set duration is typically five years (sixty months). After this period ends, any outstanding debt will get cancelled, and you will become debt-free forever. 

The exact percentage of the debt that your creditors will forgive will vary based on the terms of your original monthly payments, but it will be substantial. 

2. Ensures Your House Is Secured 

Most individuals would rather not risk anything than have their homes or property security at risk. 

An IVA debt advice UK works well in these circumstances. If you enroll in an IVA, you won't have to trade in your house or belongings to repay your debts. 

However, should you have substantial assets in your home, you may be required to remortgage to access funds as you near the conclusion of your repayment plan. 

3. No Creditors Will Try To Get In Touch With You 

Collection agencies or bailiffs visiting you? It is stressful for everybody involved. You can rest easy knowing that the law prohibits your creditors from contacting you as of the moment you formally establish your IVA (and occasionally before). 

In other words, that is the end of the; 

• Instant Messages 
• Letters 
• Emails 
• Phone-calls 
• House calls 

Should one of the creditors approach you (very unlikely), our experts will have you send them a letter explaining why they shouldn't bother you again. You may consider a lawsuit if they persist, but this scenario is unusual. 

4. Make Just One Affordable Payment 

An IVA may be the best option if you have a lot of debt and need help keeping up with your direct debit payments to several creditors. 

Your Insolvency Practitioner (IP) will help you consolidate your debts into one manageable monthly payment through an IVA. In addition, you will already know and trust your IP from working together to establish your IVA in the first place. 

When you make this payment to your IP, they will be in charge of dividing it up among all of the outstanding debts. 

Your specific circumstances will determine your monthly payment, but it could be as little as 70 pounds. 

Drawbacks Of An IVA 

1. Regular Remittance 

There will be a set payment schedule that you must adhere to. If you miss even one of the payments, your IVA could collapse, leaving you and your family in a worse financial situation than before. 

The amount due is, however, determined after meticulous analysis of your earnings and other outgoings to ensure that it is within your financial means. 

2. It Can Affect Your Credit Score 

An IVA will remain on your credit report for an entire year after it has ended. Most IVAs last for five years, so one can assume the report will no longer be there when the IVA expires. 

However, this aspect of individual voluntary agreements is fine for the vast majority of people. Once they have regained financial stability, most people feel they need more time to apply for new lines of credit. 

3. You Must Qualify To Benefit From An IVA 

Only some people are eligible for an IVA, and you must meet specific requirements before moving forward with one. The standard requirements are a minimum of five thousand pounds in unsecured debt with at least two creditors and a stable income. 

4. The Need To Liquidate Some Of Your Property’s Equity 

Your insolvency practitioner may request that you mortgage your home or property if it has significant equity. Liquifying your assets is possible only for those with excellent credit and purchasing a home with cash or a mortgage. 

Concluding Remarks 

If you want to avoid creditor harassment and make manageable monthly payments toward your debt, an IVA may be your best option. 

Bankruptcy may seem your only choice, but an Individual Voluntary Agreement (IVA) may suit your situation better. 

In most cases, you may initiate an IVA inquiry online, and if you complete the arrangement successfully, the creditors will forgive any unpaid or unsecured debt you owe them.

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