The Pros and Cons of IVAs

An IVA or Individual Voluntary Arrangements is an arrangement that is made between creditors and debtors. It is an agreement that you make with the people to whom you owe money to pay off a proportion of the money that you owe them by making a reduced monthly payment for a fixed period of time. That period is generally five years after which any remaining debt is written off.

Once the agreement has been made it is legally binding to both you and your creditors. You must maintain the agreed payments and your creditors can no longer add interest or charges to your account nor can they make demands for increased levels of payment.

IVAs are subject to the Insolvency Act which became law in 1986. Although it a form of insolvency, it does not carry all the stigma and burdens of bankruptcy and in nearly all cases it is preferable.

The main benefits of IVAs are that:

* Your debt will be written off in five years
* Your creditors will no longer be able to hassle you
* No additional charges will be made to your account
* Only a single monthly payment to the IVA will deal with all your debts
* Your credit rating will be impaired but not as much as it would be by bankruptcy
* The agreement once made is set in stone
* You will avoid CCJs or other court action
* Unlike bankruptcy it will not be published in the press
* You will still be able to be a company director

The potential downsides are:

* It might be necessary to use equity in your home to repay debts
* You must owe at least £15,000
* You will not be able to take out any additional unsecured loans during the period of the IVA
* You must keep up repayments for five years
* Your credit rating will suffer and will take some time to repair
* You will pay back a larger proportion of your loan than you would if you went bankrupt.

IVAs are relatively complex to set up and manage and must be done through specially licensed advisors who are qualified to provide IVA help.