Many people in debt at the moment are considering an IVA, and one of the burning questions on the minds of individuals considering an IVA is the pros and the cons of the IVA itself.
The advantages of the Individual voluntary arrangement (IVA) are varied and there are many benefits of this debt solution, read on below to find out more and why individual voluntary arrangements are so beneficial and the ways in which they can help people deal with their debts.
Advantages: The Pros
It is possible to freeze all interest and charges from existing debts, making it so much simpler to clear away any financial liabilities over time because the debts won’t grow due to delayed repayments/
You can write off large amounts of debt, it is possible with an IVA to write off 85% of debt, making it so that you don’t have to spend years and years struggling as the IVA arrangement will not only write off large portions of the outstanding liability but it will also heavily consolidate any monthly bills making life more manageable in the short, long and medium term.
Creditors can no longer harass you repeatedly for repayment due to what is known as an interim order which prevents any contact from creditors, bailiffs and debt collection agencies while the IVA is being set up and throughout the arrangement, this gives the debtor peace of mind that they won’t be hounded and as a result will sleep a little easier.
All unsecured personal debt can be thrown into an IVA, and these liabilities are all managed by an expert insolvency practitioner, making the management of your debt more of an automated process, all the debtor must do is keep to commitment of making the debt repayments so as to not break their IVA agreement.
Once you reach the end of the IVA arrangement not only is the arrangement completed and all debts written off, but the debtors’ credit rating will start to improve with time, making it easier gradually to procure future unsecured credit.
Disadvantages The Cons:
(For more detailed information on the advantages and disadvantages of IVAs see this page)
Some of the disadvantages of individual voluntary arrangements are subjective, however we include them here for the sake of complete information.
One disadvantage is the level of commitment you must show your arrangement, you must adjust your living standard to ensure you can stick to the monthly repayments, for some people this can be off putting however in principal when discharging and releasing debt it is a good idea to economise where possible.
Once on an IVA it may be more difficult to get a bank account, however it is still possible to get a fresh bank account, and it may be to your advantage to do so, as some of your debt repayments (monthly) may be tied in with direct debits and your unsecured debts may be with the people you bank with, so it can make sense to get a new account.
Because you are reducing repayments to your creditors this can impact your credit rating, however it would not make sense for this to be considered a total disadvantage because if you didn’t take on an IVA and continued to struggle with debts without help, there is a strong argument to suggest that eventually there would have been even more damage to a credit rating due to no payments being made or even the risk of bankruptcy.
All in all, the Individual Voluntary Arrangement is an effective way to avoid bankruptcy, but anyone in debt should make careful considerations before entering into it because it is a 5 year undertaking, however all debts are written off once the process is completed.