Chat with us, powered by LiveChat

Is an IVA worth it?

July 2, 2020

We understand that choosing to go through an IVA is a big decision. But with our help, you can finally feel like yourself again and get back on your feet financially.

Only you know whether or not an Individual Voluntary Arrangement (IVA) is right for you but we’re here to make sure this process goes as smoothly as possible while still being affordable!

What is an IVA?

An IVA can be thought of as a repayment plan. You agree to pay back your creditors as much as possible within an agreed timeframe, who will then write off the remainder of what you owe them.

The aim of an Individual Voluntary Arrangement (IVA) is to settle all your debts quickly and easily without any court appearances.

Nowadays, more and more people are feeling the weight of their debt. As this burden grows heavier each day, you may feel powerless to stop it from happening. However, there is hope for relief if we can act fast before interest rates rise even higher!

With unsecured debts totalling more than £5000 it can seem like every week you receive more emails, phone calls and letters demanding payment. The amount you owe is growing every day, with interest being added each month.

Is an IVA worth it?
It’s a tough time in your life and we here at IVA Advice debt solutions want to help get you back on track.

We will explore the possibilities so that you can be free from debt soon, as well as advise which option would work best for you!

Short term loans are not a sustainable solution to dealing with your debt. They may seem like an easy way out, but they often come at the expense of high repayment rates and long-lasting negative consequences on credit ratings.

Bankruptcy is another option for getting rid of debts quickly without paying them back and having it affect future financial stability.

However, bankruptcy brings its own set of challenges as well: You have no choice in how much you owe; there’s nothing stopping creditors from contacting your family members or employer about your past obligations if they know where to find them.

As a type of agreement that is somewhere in between bankruptcy and a loan, an IVA offers many benefits but also some considerations. If you want to determine if this might be the answer to your financial troubles with no obligation whatsoever, our advisors are more than happy to sit down with you and provide all the information necessary without making a commitment at first glance.

An IVA is a great option for people who are struggling with their debts, but it has some downsides as well.

If you don’t have the money to pay off your debt all at once and would prefer an easy monthly payment plan that could last up to five years, then this might be the solution for you!

That being said, there are also risks involved in taking out an IVA. One of these disadvantages includes how much interest will accumulate on top of what was owed before signing up which can make paying back creditors more difficult than anticipated (or even impossible).

Check out the advantages and disadvantages of an IVA

Advantages of an IVA Debt Solution

  • For a specified period (5 to 6 years), you will pay one monthly, fixed and affordable payment.
  • An Insolvency Practitioner will be there to support you during the IVA payment period.
  • Once your IVA has been in place, creditors won’t be able to contact you to demand payment. Your IP will negotiate with them on your behalf.
  • Your debt will stop growing each month because all interest and late payments charges will be stopped.
  • *You cannot be forced into selling your home in order to pay your debts
  • Employers will consider IVA preferable to bankruptcy. Your monthly payments can be adjusted if your circumstances change.
  • You might be required to release equity by remortgaging at the end of your payment term

Disadvantages of an IVA Debt Solution

  • You will need all your savings and assets to pay what you can.
  • During the IVA period, credit cards, store cards and requests for credit exceeding £500 are not accepted.
  • An IVA may not be granted to self-employed individuals or people with no fixed monthly income.
  • Professional fees will apply to the appointment of your IP
  • An IVA cannot be used to include all types of debt.
  • Your credit rating will temporarily reflect the IVA. For the payment period, your name will be added to an online insolvency registry
  • Employers may not hire staff with IVAs in place
  • A self employed IVA applicant will find it harder to come to an agreement with their creditors

If you need more help to decide: Is an IVA worth it? We dig deeper into the IVA pros and cons in our other blog post.

Your life is important to you, and so are the long-term effects of different insolvency solutions.

It’s worth keeping in mind how the long term effects can impact your life when dealing with bankruptcy proceedings or debt management.

The IVA is not the fastest way to get your debts under control, but many people find that the benefits outweigh any of its potential problems.

Filing for bankruptcy might take less time in comparison, but it will have a more damaging effect on your credit score than an IVA would.

If you decide that this is the best option for you, appointing an industry regulated Insolvency Practitioner (IP) to apply for your IVA might be a good idea. Your Insolvency Practitioner (IP) will need to review all of your information including how much money and who it’s owed too in order to determine if bankruptcy would work as well or not.

The debt management program will work out how much you can afford to repay each month and contact your creditors. They become the “go-between” so that you no longer need to have direct contact with any of the people or companies who are owed money by you. This alone removes a lot of stress from being in debt, freeing up time for more important things like spending quality time with friends and family!

Any change in circumstances must be reported to your Insolvency Practitioner (IP) during the IVA period. This will allow them to communicate with creditors.

10 Questions to reflect on

Does your current unsecured debt total £5000 or more?

IVAs are ordinarily used to deal with larger sums of money owed, but for debts under £5000, there may be a better way.

Smaller amounts can get expensive if interest payments and penalties stack up over time. Fortunately, it is possible that IVA instalments could still work out in this case as long as the amount you owe is less than your earnings each month – not hard considering many people’s debt levels these days!

Do you owe money to 2 or more creditors (e.g. credit cards; store cards; council tax arrears, catalogues; unsecured loans etc)?

Not all types of debt can be included in an IVA but if you owe money to more than one creditor, this may be the best way to solve your situation.

Are you in regular employment or have regular monthly income?

You might need to negotiate your payment schedule with the insolvency practitioner. If you’re self-employed or have irregular monthly income, this will make it more difficult for them to come up with a workable plan that’s acceptable to both parties.

If you are self employed or have irregular income, for example in the building trade or a seasonal business, you might need to provide additional assurances before entering into a self employed IVA. Your arrangement plan should be accepted by your Creditor’s as long as it is reasonable.

Self employed IVA Considerations:

If you are registered as self-employed with HMRC, your business could be investigated for potential tax fraud. If any irregularities come to light during this process, you’ll not only risk having to pay the outstanding taxes but will also face more severe punishments if it is found that your self-employed IVA was entered into deliberately to avoid paying them.

Self employed IVA risks:

If you do fall into any of these categories, you’ll be expected to have your own professional advisors working with the insolvency practitioner and HMRC advisors (if necessary) throughout the process. This can significantly increase the costs involved in an IVA and obviously isn’t open to everyone.

If you run your own business you may be interested in a self employed IVA if you are struggling with debts.

Have you tried to solve your own financial problems but made little or no progress?

Debt is a monster that never stops hunting. All too often, people find themselves unable to make the monthly repayments on their debts – barely covering interest payments and accumulating penalties for late payment.

However, with an IVA (individual voluntary arrangement), creditors can no longer add more debt or apply any penalty charges for making only partial repayment of outstanding balances per month; instead, your balance will decrease rather than keep growing!

Do you need to find an insolvency solution that will write off most or all of your debt so that you can regain control of your own life?

Paying off your debts doesn’t have to be a nightmare. With an IVA, 20% – 80% of the original debt will be repaid in monthly instalments and once it’s done you can get back on track with rebuilding your credit score. Just remember that an IVA stays on your credit file for six years.

Can you make a payment every month of at least £70?

Although there is no minimum monthly payment required for an IVA payment, lower payments will result in a longer payment period. The process will move faster if you are able to pay more each month.

Can you ensure consistency in your payments and stick to the repayment schedule?

While you are living through an IVA, it may be difficult to keep up with your monthly budget and agreed payments. Anything that affects your ability to pay the IVA payments must be reported to your insolvency practitioner, this is part of a legally binding agreement you have to sign.

Are the associated worries and anxieties of being in debt affecting your quality of life?

The constant stress of worrying about your debt and receiving monthly phone calls from creditors can be too much for you. An IVA will help you relax and let you focus on the important things in your life, such as family and friends.

All debt solutions should be carefully considered. Debt is a complex issue that takes time to analyze and decide what’s the best course of action for you.

What you should do if you are not happy with your IVA

You can complain to a debt management firm if you were told to get an IVA and feel that they misled you. Is the debt advice company a limited company registered in England? Are they regulated by the financial conduct authority?

The Financial Conduct Authority (FCA) has rules and guidelines for debt management that must be followed by debt management companies. This means that debt management companies must follow the Financial Conduct Authority (FCA) rules and guidance on collection. All documents must be a legally binding agreement, not just the individual voluntary arrangements.

Do you have the discipline needed to make sure all ‘available’ money goes towards paying off your debts for the duration of your payment schedule (usually 5 years)?

Your insolvency practitioner will work with creditors and you to reach a mutually agreeable settlement if you are unable to pay the agreed amount by the due date. There may well be a number of debt solutions that are appropriate to your needs. 

Do you have a reasonably secure lifestyle with minimal possibility of a sudden change in circumstances?

Unexpected circumstances can often arise in life. However, if your lifestyle is stable and you make good choices, you will be more likely to stick to your payment schedule. You must notify the IP if you have any questions or concerns during your payment period.

If you’re looking for debt solutions, then it’s important to consider some of the more innovative options that are available. There is a lot out there but not all will work in your situation so make sure to do your homework before committing yourself and take care when reading reviews or testimonials as those can be heavily biased.

Does an Individual Voluntary Arrangement (IVA) ruin your life?

An Individual Voluntary Arrangement (IVA) is a debt repayment plan in which you make monthly payments over a defined period of time to reduce your debts and have only small future payouts to creditors at the end of that term.

After an IVA plan has been agreed upon, it cannot be changed without permission from all those with whom you were in default on your loan agreements.

This means that if anything changes and insolvency becomes imminent during the repayment period, then the whole process must start again from scratch. It’s not uncommon for things like personal illness or loss of employment to take place before any debt has been fully repaid – so it’s fair to say there are some disadvantages to the structure and that your life will not carry on as normal.

However, there are some significant benefits too – which is why they have become so popular with consumers and trustees of bankruptcies. By negotiating a settlement directly with your creditors you eliminate many of the fees normally associated with an insolvency procedure, such as those charged by trustees or administrators for the running costs of administering everything.