The Pros and Cons of an IVA

An Individual Voluntary Arrangement (IVA) is often an alternative to bankruptcy if you have unsecured debts with multiple creditors that you’re struggling to repay. If you comply with the terms of the IVA, you could be free of your unsecured debts in just five years.

Sound like a god-given solution? It can be, but as with any debt management option, there are disadvantages to IVAs as well as benefits. Phil Nuttall, licensed Insolvency Practitioner and co-owner of IVA specialists Varden Nuttall Ltd, gives the lowdown on some of the key pros and cons you need to know about.

Pro: You’ll make affordable, fixed monthly payments for a set period, usually 60 months. After that, any remaining debts within the IVA are written off.

Con: You can’t cancel your IVA and if you miss payments and the IVA fails you would be back to square one.

‘An IVA is a legally-binding agreement that you can’t get out of,’ explains Phil. ‘It’s a big, long-term commitment that you must be prepared to make and stick to.’

Pro: You will be able to keep your home and any other reasonable assets.

Con: You can’t get any more credit during the IVA and your credit rating will be affected.

Says Phil: ‘Holding on to your home is a major benefit of choosing an IVA over bankruptcy. And as the client’s credit rating tends to be poor already, this con can often be disregarded.’

Pro: You’re legally protected from further action by your creditors.

Con: You may have to re-mortgage your home to release equity to be paid into the IVA.

‘The legal protection offered by an IVA is a huge relief to many of our clients,’ comments Phil. ‘Once creditors know about the IVA, they usually stop direct contact straightaway. And if they don’t, we’ll always take steps to protect our clients.’

Pro: In most cases, your job or self-employment won’t be affected by the IVA and it won’t be published in the papers so your friends and family needn’t know about it.

Con: Your name will appear on the Insolvency Register.

Phil says: ‘The stigma of bankruptcy is a real worry for many people, especially if their career is at stake. With an IVA, you can usually keep quiet about it and get on with your life.’

For more information about the pros and cons of IVAs, and to find out if an IVA with Varden Nuttall could work for you, please visit their website. Or call free on 0800 804 7530.