An Individual Voluntary Arrangement is about developing an understanding with your creditors to relieve the stress debt brings but still pay back what you owe. A company registered with the Insolvency Practitioners Association can help you to evaluate your debt repayment options and arrange an IVA.

When you enter an IVA agreement, you’ll have to pay a monthly amount until your debt is removed. Once you’ve paid off the remaining debt, you can rebuild your credit rating, and your name will be removed from the insolvency register.

So with all of these benefits, it’s important to remember that an IVA is a convenient solution and can offer more security than other debt solutions.

As with most things, there are some negatives of an IVA, and it’s crucial for you to decide if it’s a suitable option for you to gain more financial control and avoid further legal action. Here are the cons of an IVA and how they might impact your life.

You Can’t Use An IVA For Some Unsecured Debt

In some cases, your debts won’t be eligible for an IVA, which can mean it’s not the best solution for your needs. These debts include:

• Court Fines
• Student Loans
• Child Support/Maintenance
• Social Fund Loans

If most of your debt relates to these loans, you might find that another repayment scheme works best for your needs. Before even taking out an Individual Voluntary Agreement, you should ask a professional if your debts are eligible for the plan.

It Can Impact Your Credit Rating

Every Individual Voluntary Agreement goes onto a register, which is accessible to the public and various lenders. People will be able to look at the register and will see that you have outstanding debts. Of course, this can impact your credit file. It might be challenging to gain employment in certain professions, such as the legal and financial sectors, because both review a potential employee’s financial circumstances. Lenders and credit reference agencies will also be able to view your insolvency mark, which means you could struggle to get credit for essential items and costs, including mobile phone contracts, new cars and any other financial solutions. In most cases, people find they’re subject to high-interest rates; but it’s not all bad. Once you complete the IVA, you won’t have to make any further payments, and it will be removed from your file after six years. You can rebuild your credit rating slowly, and many people decide to use an IVA solution because it allows them to start afresh and avoid creditor harassment.

You’ll Have to Put Windfalls Into Your IVA

One of the biggest IVA cons is that you’ll have many financial restrictions placed on you when you enter into an agreement. While many people don’t see this as an issue, you’ll need to put the funds into your account if you receive a windfall. But what counts as a windfall? Well, it could be a bonus from work, inheritance payments or a settlement. If the amount you receive is over £500, you’ll be legally obliged to pay the money into your IVA account. The primary purpose of an IVA is to pay back your debt amount, so some people don’t like to enter into an arrangement because it means they don’t get to spend their windfall. However, it can help you pay off your debts quicker, and you’ll enjoy more freedom in the future.

There’s a Possibility of Equity Extension

Any insolvency practitioner will tell you that you could be asked to release your homes available equity when you approach the end of your agreed monthly payments. If you fail to re-mortgage your property, there could be a 12-month extension for your case.

The Agreement Could End If You Fail To Keep Up With Your Monthly Payments

Your IVA will take place during a fixed period, and it’s essential to understand that you’re legally bound to make the payments and ensure you stick to the agreement. When you have your first insolvency appointment, your practitioner will explain your legal obligations, and then it’s up to you to keep up with your monthly repayments. If you fail to do this, your insolvency practitioners will terminate your arrangement, which means that your creditors can chase you to repay the debt in full. When you enter into an IVA, your creditors agree to stop all interest increases and allow you to repay your debts over a fixed period, so you’ll find that you’ll have extra fees and could be dealing with bankruptcy. In some cases, you might be able to take advantage of payment holidays, which means you can have a short-term break from your payment plan, but this depends on your individual circumstances.