Free advice line 0800 014 7863
As a responsible company we believe it is important to explain IVA disadvantages to enable you to make an informed decision. While an IVA can be an attractive alternative to bankruptcy, there are some conditions of an IVA that should be carefully considered.
If you have any questions regarding any of the information disclosed below or would like to know how an IVA could help you, please call 0800 520 0923 or complete the online form.
Unsecured debts such as personal loans, student loans, credit cards and business loans can be included under an IVA.
However there are debts that are exempt, including cars on hire purchase, mortgage arrears and council tax bills.
IVA disadvantages compared to a DMP are as follows:
As part of the agreement, you may be required to release some or all of the equity on your home.
An IVA is only applicable to debts greater than £12,000. Offering to repay less that 25% of the debt is also likely to be rejected. Monthly payments will be at least £200.
You will not be permitted to undertake any unsecured borrowing such as credit cards or store cards while you are in an IVA.
An IVA term is five years compared to just three for bankruptcy. Failure to maintain your IVA payments will in all likelihood lead to bankruptcy, so stringent control of your finances is vital.
Your credit rating will suffer as a result of an IVA and while not quite so badly had you been made bankrupt, gaining credit will still be difficult. There may be a hangover period once the IVA term has been completed by approximately one year.
Bankruptcy dramatically restricts the amount of debt you repay whereas with an IVA, you may still be subject to around 40% of your debts. It is possible to have 75% of your total debt cleared, but bear in mind this is not in every case. With an IVA you will be required to repay a great deal of what you owe, as opposed to bankruptcy, which cancels the majority or all of your debt.
About 45 per cent of people who enter into an IVA never complete repayments, meaning the thousands of pounds it costs to set up the plan is added to the existing debt. About 60 per cent of Britain’s £25 billion problem debt is on credit cards. When a borrower fails to repay, IVA then bankruptcy will be the only inevitable result. If you are struggling to keep up with IVA repayments contact your IP as soon as possible. Your Insolvency Practitioner will try to help as much as possible.
See our pages on Bankruptcy as an alternative to IVA.
Return to Debts homepage.
