Individual Voluntary Arrangements – Pros and Cons
An IVA is a good solution because:
Interest on your debts is frozen and your loan and card repayments go to the IVA fund
It’s legally binding on your creditors, too; they can’t change their minds once the arrangement is accepted. They are all bound, even those voting against the arrangement.
An IVA provides you with certainty – you know what fixed lump sum you need to raise or what monthly contributions you have to make.
You pay what you can really afford for five years – and part of your debt will be forgiven. This will not happen in a debt management plan.
You stay in control – an IVA is your offer to your creditors and you deal with your affairs in your time. This will not happen in bankruptcy
But there are some issues to bear in mind:
An IVA is not an easy option. It is a big commitment for up to five years.
You will need to disclose all your financial affairs to all your creditors and you commit a crime if you do not do so.
The creditors need to be ‘won over’ to support the arrangement – they will expect quite strict terms and conditions.
The offer needs to be better than in bankruptcy – you will have to work hard to get your creditors support.
Your credit record will still be damaged (but at the end of the IVA a certificate of satisfactory completion will be issued and can be logged at credit reference agencies).
You will need to comply with the terms of the proposal and in particular keep up the payments you have promised. If you do not, you may face a petition for bankruptcy.