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What Does an IVA Stop You From Doing?
If you have debts of over £5000, you may be able to write off your debt with an IVA

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For people in significant amounts of debt, an Individual Voluntary Arrangement can be a beneficial solution. It enables you to consolidate your outstanding debts, into an affordable monthly payment, over a specified period.

While you’re in an IVA, your creditors won’t be able to hassle you, and there will be no interest rate increases, which allows you to pay off your debts and repair your credit file in the future.

There are many benefits of an IVA, and it’s undoubtedly a helpful debt solution. But as with many other things, there’s always some drawbacks to taking out an arrangement.

In this guide, we’ll reveal what an IVA stops you from doing, so you have the information to make a decision that will benefit you in the long term.

Applying For Credit Cards or Other Finance

When you enter into an Individual Voluntary Arrangement, you’re effectively guaranteeing your creditors that you’ll repay any money you owe them. This can take time, but it’s an excellent solution if you want to avoid interest rate increases and getting into even more debt.

However, every IVA will appear on the Individual Insolvency Register, and credit reference agencies will be able to view your information. This can make it challenging to secure financing solutions, especially if you owe all your creditors money.

You’ll also have to receive special permission from your insolvency practitioner before applying for any credit amount of over £500, and this will be the rule until your IVA is complete.

How Long Will My Individual Voluntary Arrangement (IVA) Impact My Credit Rating?

Most IVA’s last for five years, assuming you complete your payments on time. Your insolvency practitioner will also mark you on the register, but that will be removed six years after the IVA commences.

However, if you fail to keep up with your repayments or miss a monthly instalment, it might impact your credit reference file for longer.

As your credit score determines your eligibility for renting a property, purchasing a car and other essential items, you might find that you’re offered credit but have to pay higher interest rates.

The thing to remember is that after the six years pass, your file will be clean, and you can work on rebuilding your credit rating.

What About My Home and Car?

When most people enter into an IVA, their main worry is whether they’ll get to keep their home and car. Both are considered assets, and you’re required to inform insolvency practitioners of any houses, vehicles and items of worth such as jewellery in your possession.

In most cases, you won’t need to worry about your home, but an IVA is tailored to your personal circumstances, so your debt management plan will be different to others.

Your insolvency practitioner might ask you to release some available equity from our home, but this depends on how much additional income you have and the terms of your IVA agreement.

Most people worry about getting on the property ladder, and obtaining a mortgage will be difficult. However, you should be able to rent if you can pay the up-front fees or have a guarantor.

Ask Your Insolvency Practitioner What Your Restrictions Will Be

Your insolvency practitioner should be your first port of call when it comes to discussing your monthly payments and the potential limitations. They’ll discuss your personal or financial information to get a good idea of what you can afford.

A car is an essential spend, so your insolvency service will usually allow you to keep your vehicle – but there are limitations. For example, if you own a Jaguar, you might have to sell it and put the money towards paying off your debts.

You’ll be able to keep some of the money from the sale to buy a cheaper vehicle, and doing this will result in lower monthly payments – or you’ll pay off your outstanding debts quicker.

Can I Work In Any Industry?

While an IVA shouldn’t affect most careers, it could restrict you from some roles. These are usually within the financial industry or other sectors that demand financial responsibility from their employees. You’ll have problems with the following industries:
  • Property
  • Law
  • Finance
  • Accountancy
If you’re already employed in these industries, you might need to explore your rights further.

Always Check Your Employment Contract

Your employment contract will have vital information about your obligations as an employee, including what you should do if you have debt problems. You could cause more problems by not mentioning your situation to your employer in the long run, so it’s always best to cover all bases. You can also talk to your trade union, a professional membership body or seek advice from insolvency practitioners. If you’re seeking employment in the fire service, prison service as treasurer of a registered charity or any other roles that have a degree of responsibility, you should check with your insolvency practitioner as to whether you’re allowed to work in the industry.

What If My Individual Voluntary Arrangement Fails?

In most cases, your IVA will prove to be an effective solution for your needs, and the payment arrangements make life easier. However, if your IVA fails, you will find yourself back in the same financial situation, which means your creditors can chase you for money. The main benefit of an IVA is that it enables you to consolidate your outstanding debts into one affordable payment. If you miss payments or fail to meet your monthly obligations, it could lead to your insolvency practitioners terminating the agreement.

Before Agreeing to an IVA, Consider the Following Things:

  1. Are you ready and willing to commit to paying a monthly amount?
  2. Do you accept that you’re entering into a legally binding arrangement?
  3. Are you willing to release equity and sell assets of significant value?
  4. Do you understand that an IVA might negatively affect your credit file for six years?
  5. Is an IVA the right solution for your needs?
Remember that IVA’s can have strict rules, and certain elements might be off-putting for some people. For example, if you manage to find a credit lender that will offer you finance, you’ll still need to get written permission from your insolvency practitioner. You’ll also be on a public register called the Insolvency Register. Still, while the IVA terms can seem restrictive, they’re designed to help you to pay off your creditors and will relieve you of debt so you can build a better financial future. As soon as the IVA starts, it will be on your file for a maximum of six years, which means that you’ll be able to rebuild your credit rating.

Would You Like to Discuss Your Debt Solution Options?

As a registered Insolvency Practitioner (IP), we support our clients to manage their debts and repay creditors. From the initial advice to drafting an IVA proposal and securing a legally binding agreement, we can help you manage your obligations.

Our friendly team is available to discuss various debt solutions and share information on how an IVA affects your finances. Please feel free to contact our registered office today, and we’ll help you manage your creditors and relieve the weight of debt that’s holding you down.