Potential Problems with IVAs

An IVA can seem like an ideal arrangement, and for many people it is. It allows some breathing space when it comes to paying off debts. You get to take things slower, removing your insolvency over a process of fiver years, rather than going through the stress and strain of bankruptcy, and you get to protect key assets too. But that doesn’t mean that IVAs are for everyone. If you’re thinking of taking one out then you need to be sure about a few things first. These are some of the main considerations.

The key thing with IVAs is that they require you to keep up with payments. These payments might be as little as 200 a month, but if you fail to keep up, you won’t have any alternative but bankruptcy, and that will mean that the things you’ve tried to protect might be taken by bailiffs to pay of creditors. You basically need a steady job for five years to avoid yourself the worry loss of assets that bankruptcy poses.

Bankruptcy takes less time – usually only a year or less – and will actually mean you lose less money. But it does result in assets being taken, accounts being taken out of your hands, and allows creditors to hound you. So IVAs give you a structured, calmer process at a price. They’re only really a risk if you can’t keep up with payments, so make sure you have a steady course of income before you enter into one. Another thing to watch is that even if you keep up with payments over a long period, failing to do so later on might mean a nasty shock in terms of how much you still owe creditors: IVA supervisors take money out of creditor repayment for their fees.

For some people it’s also not ideal having more control over your finances, and the ability to keep taking out more credit. IVAs don’t necessarily break the cycle of borrowing more you can afford in the way that bankruptcy does. They allow you control of your bank account, and allow you to take out loans. So potentially someone could continue to live beyond their means.

Consult an Independent Financial Advisor before making a choice on debts.

Find out more about IVA online. An IVA could be the best finaincial decision you ever made.