Should You Consider IVA & Is an IVA Worth it?

Is an IVA Worth it

Insolvency is a very stressful situation for any individual or company, it can lead to bankruptcy and affect your credit score. But fortunately, there is an option that provides you with a way out of it – IVA (Individual Voluntary Arrangement).

An individual voluntary arrangement or IVA is a formal agreement that is made between a creditor and debtor. According to this agreement, you are allowed to settle your debts over a period of time instead of clearing it all at once. This can relieve some stress and help to avoid bankruptcy, with comparably less damage to your credit score. It would also legally protect you from any action taken by the creditor, during the arrangement period. 

But, is an IVA worth it? An IVA might not always be the best option, whether you should go for an IVA depends on the benefits and risks. You need to carefully consider certain aspects before deciding on this matter. 

How Does it work?

An individual voluntary arrangement is managed by an insolvency practitioner, who is a certified lawyer or accountant. You will find many private companies that provide this service. You are generally required to choose a repayment plan and make the payments according to it. Though the creditors must also agree with the repayment plan before you can proceed with it. After this is sorted out, the IVA practitioner deals with the creditors throughout the agreement period. 

Now, let’s get to know about the benefits and cons of IVA to understand, this will help you to understand – is an IVA worth it.

Benefits offered by an IVA

There are many benefits that an IVA can provide you. Here are some of the biggest ones that it has to offer :

  • You can repay the debt in instalments

The biggest benefit you get is that you’re not required to pay off all your debts at once. Moreover, the creditors can’t put any kind of pressure on you to do that. If this is not enough to clear your doubts, then get to know more – is an IVA worth it.

  • The total amount to be repaid cannot be increased

After you get an IVA, the amount you have to repay would be fixed. You would only have to pay the amount that was agreed upon by you and the creditor. The creditor doesn’t have any right to charge interests during an individual voluntary arrangement.

  • Your assets are legally protected

In general, the creditors can put your assets on auction to retrieve the amount you owe them. But, if you get an IVA, they cannot harass you any more. The only requirement would be that – you make the payments that have been agreed upon and stick to the terms of the agreement.

  • The creditors can’t trouble you 

Once the arrangement period starts, the creditors can’t put any kind of pressure on you to clear the debt. They can’t take any kind of action on you, as long as you follow the terms. All the dealings with them would be handled by the insolvency practitioner.

  • The terms are legally protected

An IVA is a formal agreement, the terms enjoy legal protection. It is a legal bond and they remain fixed, and can’t be broken after both sides have agreed to them.

  • Saves you from bankruptcy

In general, bankruptcy is more negatively viewed as compared to insolvency. Yes, though your credit score would get affected after getting an IVA, it would be more affected if you go bankrupt. So, people are opting for IVA more often.

Risks that you Face in an IVA

Apart from benefits, an IVA also has its fair share of risks. This is where the question arises – Is an IVA worth it? Here are some of them that you might want to look out for :

  • It can be expensive

Depending on the amount of the debt you owe, an IVA can be quite expensive. It can put additional strain on your savings. So, you must carefully consider the cost of the IVA before going for it. 

  • You’ll have to contribute all your extra incomes and savings

If you get an IVA, you should make a budget plan and strictly follow it. If you make any extra income or savings during this period, you’d have to contribute most of them to pay off your debt. 

  • Failing to pay might get the IVA cancelled

If you have paid some instalments and are unable to pay further, the arrangement might get cancelled. This can happen whenever the insolvency practitioner and the creditors are convinced that you can’t pay the next instalment.

  • It affects your credit score

Your credit score would be affected to quite an extent if you get an IVA. This would result in a difficulty to get further loans, for a period of time. Even if you’re able to get loans, you won’t be able to get low interests. Also, it is not uncommon for people to get rejected due to a low credit score. 

When can you apply for IVA? And Is an IVA worth it?

Not all debtors can apply for an IVA. There must be at least two creditors to whom you owe the debt. The debt must reach a total of £10,000 or more. In addition to these criteria, you must make sure that you can pay regular instalments. This is the most important consideration that you must take into account before getting an IVA. Also, you are advised to get it, only if you can’t deal with the creditors, and need someone to manage the repayment. So, if you are still questioning – Is an IVA worth it? Then, yes it totally is.