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Being heavily in debt is one of the worst things a person can go through, and it makes you feel nervous, uneasy and embarrassed. Not only will credit reference agencies view you as an unsuitable candidate for finance, but your creditors will also chase you for payment and could even take your home and other assets.
For many people, an Individual Voluntary Arrangement is one of the best solutions available because it offers legal protection for creditors as long as they make a pre-agreed upon single monthly payment to decrease their debts.
If you’re new to the world of IVA’s and aren’t sure whether it’s the right solution for you, we have all of the answers you need.
Individual Voluntary Arrangement (IVA) Pros and Cons
You’ll Keep the Creditors at Bay.Many of our clients come to us seeking debt help because they’re worried about their creditors. Unfortunately, when you owe people money, they will take the necessary steps to recover that debt. Of all the things that can cause stress, creditor harassment is up there at the top of them. But when you enter into an IVA, your creditors agree to halt all direct contact with you, which means you can make your repayments without the constant phone calls and the threat of a visit from the bailiffs. As long as you keep up with your monthly payment plan, you’ll be able to relax and won’t have to worry about interest rates increasing.
You’ll Have an Affordable Monthly Payment Plan.An Individual Voluntary Arrangement is a popular way to become debt-free, and while you need to pay the money owed to creditors in full, you’ll be able to live comfortably. Your insolvency practitioners will look at your monthly outgoings and factor them into your debt repayment plan. For example, essential outgoings include your rent or mortgage, utility bills, grocery shopping, transportation costs, caring for your children and pets, and general living expenses. The practitioner will take your financial circumstances into account and develop a plan that accommodates all your payments.
It’s a Legally Binding AgreementWhen you enter into an IVA, your creditors also have a set of rules to follow. They’re not allowed to directly chase you for payments, and they also cannot increase your interest rates at any time. This is a positive solution for many people because they don’t have to worry about creditors harassing them.
Your Assets Are ProtectedAn Individual Voluntary Arrangement takes many things into account, including your personal circumstances. It’s essential for people to feel secure, and one of the most worrying times for anyone in debt is the potential to lose their sense of security. If you own a property or car, they won’t be subject to the IVA, and you’ll be able to pay off your remaining balances without worrying about losing your transportation or home – as long as you stick to your end of the arrangement.
You’ll Write Off Your Debt.One of the most worrying things for anyone is being in debt and having no clear roadmap out of the situation. With interest rates continually rising and bailiffs chasing payments, it’s challenging for people to gain any financial control over their life. With an IVA, you enter into an agreement to make regular, affordable monthly payments, which will gradually reduce your outstanding debt. It gives people a clear time frame of how long they can expect to owe money, and the added support of an insolvency practitioner means people can completely write off their debt and repair their credit file.
An IVA Has Less StigmaAs a society, we always feel embarrassed to talk about debt – even though most of us are in some form of debt. If you have a credit card, or a mortgage, you’re technically paying off a debt, but most people don’t like to talk about their financial struggles. Bankruptcy is often seen as a social stigma, and most people will do anything to avoid it. An IVA means you don’t have to file for bankruptcy, and you can benefit from a more effective debt write off solution.
It Will Give You Better Options in The FutureWhen someone files for bankruptcy, it impacts their employment options. There are many jobs that aren’t available, including:
- Director of a Company
- Estate Agent
- Trustee of Charity
- Member of Parliament
- Join the Military or Police
- Hold a Black Cab License
- Become a Licensee
- Chartered Accountant
- Any Financial Services Authority Related Job
Common Questions About the IVA
When it comes to IVA pros and cons, there are more advantages than potential pitfalls – which is why so many people choose it as a debt solution. Below, you’ll find some of the most common questions we get asked and answers to them.
Will My Credit Score Be Impacted?
Any form of debt impacts your credit score, and it’s unavoidable. For example, if you miss one payment on your credit score, that has a negative impact, so the short answer is, yes, an IVA will impact your credit rating.
But, once you pay off your debt, you can begin to rebuild your credit. An IVA stays on your record from the day it begins, and it will be removed after six years pass (as long as you pay back the money).
What If I Can’t Make My Payments?
An IVA is one of the best debt solutions for people, but you need to stick to your end of the deal. You’re expected to make your monthly payments on time, and if you fail to do this, your insolvency practitioners will terminate your arrangement.
Your creditors will then be able to take legal action, which means you could lose assets like your car and house. In some cases, you might be able to take a payment holiday to get back on track.
This will be an agreement between you, your insolvency practitioner and the people you owe money to. Most creditors will agree to payment holidays, especially if you’ve kept up with your monthly instalments because it’s better than them taking further legal action.
Will I need to Live Off of a Budget?
Depending on your debt level, your insolvency practitioner will come up with a monthly plan so you can make your payments successfully. While there’s room for your daily living expenses, you will need to live off a strict budget because the goal of IVA payments is to repay your creditors.
The budget for each customer differs, depending on how much debt they owe and their monthly expenses – but you will inevitably need to cut back on some luxuries.
The Bottom Line
It’s clear that an IVA can help people manage their debts and move towards a better financial future. It can also provide both you and your creditors with peace of mind that monies owed will be paid within a fixed period.
The best way to arrange an IVA is to meet with a licensed insolvency practitioner, who will discuss your options and reach out to your creditors.
If you’d like to know more about Individual Voluntary Arrangements, including how to access them, please arrange an insolvency appointment with us today.
Our friendly team will learn more about your personal experiences and then suggest what debt help solution is best for you