The Advantages And Disadvantages Of An IVA
An will help anyone who is beset by difficulties clearing their debt. It is an exceptionally persuasive offer to households who would risk losing their home if they were made bankrupt.
An IVA could help if;
Your creditors have already refused to accept an informal debt management agreement
You previously had an informal arrangement, but you could not adhere to its terms.
You have so many creditors that an informal debt management arrangement would be impractical. You are being made bankrupt, or you are currently bankrupt and you want to reverse that position. You previously had an informal arrangement, but you could not keep up withits terms.
Your creditors have not agreed to an informal debt management agreement
You you are in peril of being made bankrupt, alternatively you have already become bankrupt and you want to reverse that position.
You are in debt to so many creditors that an informal Debt Advice arrangement would not be practical.
You may have a small company which you would be unable to keep operating if you became bankrupt. You would lose your job if you are made bankrupt, jobs such as accountants, solicitors, police man and armed forces. You have a significant amount of money but it is still inadequate to completely repay your debts. You want a formal arrangement with your lenders to accept that lump sum and write off the balance of what you owe.
You have equity in your house. You will not necessarily lose your home if, with the agreement of the IP and your creditors, it can be kept out of the IVA or Individual Voluntary Agreement. However, your creditors will normally ask for the maximum amount of the equity in your home as they can get. With an IVA you are less hampered restricted than with bankruptcy. EG, with an IVA or Individual Voluntary Agreement you are not obligated to notify your bank. So you will still be able to use your bank account.
The Disadvantages of an IVA
If you fail to keep to the terms of your IVA, then the Insolvency Practitioner who is supervising your IVA or Individual Voluntary Agreement or your lenders, can petition for your bankruptcy.
If three quarters of your creditors do not agree to your proposed IVA you are subsequently back to where you started. It will be 12 months before you can make another IVA proposal. You need to get it right.
If you are a homeowner, it could be that under the terms of the IVA or Individual Voluntary Agreement you have to sell your house. An alternate approach is to include a clause in your IVA where you get your house appraised after an agreed amount of time with a view to releasing the “equity” in your property at that time, to your lenders. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your financial position alters and you can’t afford the repayments, unless your Insolvency Practitioner can persuadeyour creditors to accept a revised contract, your IVA will terminate. This could mean you are facing bankruptcy.
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