Individual Voluntary Arrangement (IVA) Pros & Cons

Stop Debt Collectors Individual Voluntary Arrangement (IVA) Pros & Cons

Individual Voluntary Arrangement (IVA) Pros & Cons

Once you are deep in debt, it can be hard to get out of it. Falling behind on one payment can set you back months. Your income won't change, so you can double up. This is where the IVA pros and cons may influence your next decision. Is the IVA truly something that can benefit you? DoNotPay has the pros and cons of using it and can help you decide if it is a viable option for you.

What Is an IVA?

An IVA, or Individual Voluntary Arrangement, can help you escape debt and harassment by creditors. It is a legally binding agreement between creditors and yourself. It says you will pay your debt over a specific time frame. You and your creditors will have to stand by the agreement. It is a flexible payment option for your debt based on what you will spend as you catch up.

How an IVA Works to Help You Deal With Debt

If you are in debt, an IVA may help you, provided you have a debt that it can cover. In most cases, it will cover most. However, there are some exceptions.

An IVA will not cover:

  • License Arrears
  • Magistrate Court Fines
  • Maintenance Arrears (If Ordered by a Court)
  • Child Support Arrears
  • Social Fund Loans
  • Student Loans

If you have debts that are not payable through an IVA, you will need to work toward paying them separately. If you have a debt that is covered by the IVA, it must be set up by a qualified person. This will mean contacting an insolvency practitioner (IP).

You can find out more information about the process and the services of an IP by contacting:

                    The Insolvency Service inquiry line
Telephone:0300 678 0015

Monday to Friday, 9 am to 5 pm

Email:insolvency.enquiryline@insolvency.gov.uk

Keep in mind, that they will charge you for their services. The cost is based on the amount you will pay back to your creditors using the IVA. Therefore, it may be wise to contact one to find out your estimated charges before you move forward with the IVA. Once you decide the IVA will work, your repayment plan will be based on what you can reasonably afford to pay. In most cases, monthly payments may be spread out over 5-6 years. It depends on what you owe and what you can pay.

At the end of this time, any debt that you owe that you were unable to pay, should be erased. This means that you will not owe anything more to your creditors. However, this doesn't always mean that it is a good option for everyone. There are several IVA pros and cons to consider.

Pros and Cons of IVA: Is It the Right Choice for You?

Deciding whether an IVA is right for you can only be done if you fully understand the commitment that you are making to your creditors. Therefore, we wanted to provide you with a list of pros and cons that you should consider before diving into an IVA.

Pros: Why an IVA Could Be Right for You

An IVA wouldn't be available if it wasn't beneficial to some people.

The pros include:

  • It Offers Affordable Payment Options
  • The IVA is Legally Binding
  • It Ensures that Your Assets Are Protected
  • Your Payment Plan is Fixed and Reliable
  • Your Interest Rates and Your Charges are Typically Frozen
  • Creditors Are Not Able to Harass You for Additional Payments
  • You Instantly Get Protection from Bailiffs and Other Legal Action

Cons: The Risks of Using an IVA

An IVA will negatively Affect Your Ability to:

  • Improve Your Credit Limit or Rating
  • Maintain Your Financial Privacy
  • Live Freely and Spend Money Freely (It Requires a Strict Budget)
  • Keep Your Current Job (Especially If You Are an Accountant or a Solicitor.)

Using the IVA may also make it necessary for you to release equity from your home.

What Happens if You Miss IVA Payments?

Everyone understands complications may come up that may make it difficult for you to pay. However, this does not excuse you from making payments. If you miss one or more payments, you will need to contact your IP.

Your insolvency practitioner will need you to tell them why you missed the payment. They may send you a notice of a breach to fill out. You will typically have three months to respond to the notice and catch up on your payments. If you succeed, then no further action will be taken.

If you cannot catch up, your IP may:

  1. Change the IVA Terms and Lower Your Payments to Help You (If you have provided a valid reason for being late, such as a lost job, medical conditions, etc.)
  2. End Your IVA and Provide You with a Certificate of Termination.
  3. Apply to the Courts to Make You Bankrupt.

These consequences are in place because once the IVA starts, everyone must follow through with their part of the agreement. Not paying means you failed to do your part.

How to Get an IVA Yourself?

If you feel an IVA is something that may work to help you relieve your financial burdens, there are several steps for you to take. You cannot do it alone.

Step 1: Find Your Practitioner

You must have an insolvency practitioner. Therefore, your first step will be to find a practitioner that you can work with. This can be done by visiting Insolvency Practitioner. When looking for an IP, you should talk to several so that you can compare costs and fees to find the one that works best for you. Some IPs will offer a free introductory meeting or at least a reduced rate.

Step 2: Prepare for Your Meeting

Once you have set up your appointment, you need to prepare for your introductory meeting.

This includes gathering information like:

  • Your Proof of Income (Payslips, Benefits Letters, Bank Statements, Etc.)
  • Proof of Your Savings Account (If Applicable)
  • Proof of Your Rental Agreement or Mortgage Payments
  • A List of Your Assets and How Much They Are Worth
  • A List of Your Creditors and Your Debts (You Can Bring Letters and Other Papers Regarding this Information.)

You will also need to provide a budget sheet that can show your income and the amount that you spend. Accuracy is important. You must be honest with your IP.

Step 3: Getting Started

Your IP will need to go to the court to get an interim order. This will stop your creditors from acting against you during the process of setting up an IVA. The IP will then look at your finances and attempt to find ways to raise more money for your creditors. Certain items may be excluded, such as a vehicle that you must use for work. The goal is to come up with a repayment plan that is affordable for you, yet high enough to satisfy your creditors. Once this total is found, your IP will draw up a proposal that can be taken to court.

Step 4: Settle the Terms of Your IVA

Your creditors will either agree or disagree with your proposal. If they disagree, you may have to start the process all over again. If they agree, then everyone will be legally bound to follow through on the process.

It can take a lot of time and several meetings to try to reach an agreement. This can be frustrating for some people since it may mean missing work and a lot of stress. If you would like to learn about other options for dealing with debt, DoNotPay may have a solution that is easier for you.

How DoNotPay Simplifies Dealing With Debt

DoNotPay offers a Debt Collection Product that can help you reduce your debt concerns. The process is quick, simple, and secure. All it takes is three simple steps.

To get started, you simply need to:

  1. Search “debt collection” on DoNotPay.

     

  2. Answer a series of questions about the debt collectors, including when you were contacted and how you were contacted, so we can determine if they have violated any debt collection laws.

     

  3. Decide which course of action you want to take based on our guidance, such as filing a debt verification request, demanding for the collectors to stop contacting you, or reporting them to a professional trade association.

     

And that's it. Once you choose the course of action you want to take, DoNotPay will handle the rest. We'll deliver your request directly to the debt collectors via first-class mail, or file your complaint automatically with the relevant trade association or ombudsman.

DoNotPay Can Get Any Creditor off Your Back

The DoNotPay process of handling debt is effective.

The people that we have helped have had us prove our abilities with a variety of companies, including:

We feel confident that we can help you deal with any company or entity that you owe money to.

What Else Can DoNotPay Do to Help You Financially?

Whether you are looking for IVA pros and cons or hoping to solve other financial issues, DoNotPay is here. We can help you with bills or take your situation into small claims court if you need us to. You tell us what you require, and we will show you a product that can help.

Some of our most used financial products include:

When you are ready to deal with your debt, DoNotPay is here to help. You can visit us online any time if you would like more information about our many services.

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