Many UK residents are looking for debt solutions, particularly in the light of the recent coronavirus pandemic and the unforeseen impact this may have on the British economy.
Debt solutions range from bankruptcy to debt management plans, including the IVA for people who have more than £5,000 of debt, and debt consolidation loans for people who have good credit ratings.
Before committing to a debt solution, it can be necessary to consider the pros and cons, and the strengths and weaknesses of whichever debt solution you are thinking of committing to, on this page we will consider the advantages and disadvantages of the IVA.
For a comprehensive guide on the ‘IVA pros and cons’ then visit this page for more information, for a summary keep reading.
Contents
IVA Pros (Good points of an IVA)
- The IVA has a component known as the ‘interim order’ which is a legal injunction which protects the debtor from creditor hassle and any direct contact not only whilst the IVA is being setup, but also for the duration of the IVA and until completion, in which case the creditors will have no reason to contact the former debtor (now that the debts are clear).
- The IVA consolidates all unsecured debts into one, low monthly repayment, enabling the debtor to pay debts at a monthly rate which is much more manageable, freeing them up to focus on matters such as their job, their health, family life and other matter which may need the attention of the person in debt.
- The IVA gives the debtor an ‘appointed representative’ which is an individual (usually an insolvency practitioner like Irwin Insolvency) which handles all the contact between the debtor and the creditor meaning the debtor doesn’t have to communicate directly with the companies’ he/she owes money to.
- It enables the debtor to write off (in many cases) more than 85% of their debts upon completion of the IVA (usually after 5 years but sometimes six in the event of a remortgage).
IVA Cons (Bad points of an IVA)
- The IVA does not completely save an individual in debt from a bad credit rating, and the reduced (consolidated monthly repayments) contributions will show on the credit report for a period of time.
- The IVA cannot feature debts of all different types, for example creditors generally will not agree to mortgage arrears and VAT arrears in businesses to be included in an IVA, so not each and every debt can be included.
- The IVA still needs to be approved by creditors before this debt solution can get underway, a minimum of 75% of all creditors must agree to the IVA before it can begin.
Summary Of The Merits Of An IVA
In summary, it is important that the IVA is taken seriously and personal circumstances are assessed before the plan can begin, it is important the person in debt thinks carefully about the commitments involved, to find out more about this speak to a debt advisor for help in determining if this is a good solution for you.