The positives and negatives of an Individual Voluntary Arrangement (IVA)

20 July 2014

Positives for an IVA

  • An IVA lasts for a fixed period of time, normally 5 years. IVA’s are not publicised in newspapers but details can be found on The Insolvency Register, which is publicly available.
  • Once an IVA is in place, your creditors are not allowed to take further legal action against you as long as you stick to the terms of the arrangement. All interest and further charges stop, as does all direct contact from your creditors. All contact then is via your Insolvency Practitioner.
  • Regardless of your professional position, you can continue to work with an IVA in place (subject to your individual “Employment Contract” & Conditions)
  • A part of your overall debt can be written off at the end of the arrangement
  • If you are running a business you can continue to operate and also act as a Director.

Negatives of an IVA

  • An IVA will damage your credit rating and you will not be able to use your credit/store cards. However you can still use prepaid cards.
  • If you have any equity in your property or any other significant asset of value, you may be required to release some, or all of this, as part of the IVA agreement.
  • Failure to keep up your IVA monthly payments will mean you will be bankrupted. A high proportion of IVA’s are not sustained and end in failure and bankruptcy.
  • You will pay back more than you will in a bankruptcy.
  • Many people applying for an IVA will not succeed, yet you will have already funded the investigation and application. You will then need 75% of the total debt value voting in favour to begin (or put another way, just 1 or 2 creditors holding 26% of the total debt can stop the proposal).All your creditors must be involved. Any creditors with a personal guarantee from you would normally vote against.
  • The Insolvency Practitioner has to be paid to set the arrangement up and then monthly for the period (normally out of money that would otherwise go to the creditors.)
  • An IVA will cost substantially more than a Bankruptcy and generally lasts a lot longer.

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