There a number of advantages and disadvantages to an Individual Voluntary Arrangement (IVA). However their relevance will very much depend on your individual circumstances. We consider the advantages first.

The Advantages of an Individual Voluntary Arrangement

1. Debt written off
Normally your IVA payments will last for a maximum of 5 years. At the end of this term any unsecured debts included in the Arrangement but still outstanding are written off. This means that you know exactly when your IVA will end and when you will be free of the debts you included.

2. Legal protection from creditors
Once an IVA has started, your creditors are no longer allowed to take any action against you to collect their debts. They will stop writing to you and calling you. In addition you are legally protected from creditors trying to get County Court Judgements (CCJ) or attachments of earnings against you and Charging Orders against your home.

3. Interest and charges frozen
Your creditors are no longer allowed to add interest and charges to your accounts once your IVA has started.

4. HMRC Tax and VAT debts can be included
As long as your IVA proposal is reasonable HMRC will agree to it and any tax or personal VAT debts you have can be included. The IVA is therefore ideal for dealing with debt problems if you run your own business.

The Disadvantages of an Individual Voluntary Arrangement

It is important to understand that as well as benefits, starting an Individual Voluntary Arrangement can also have some disadvantages. Before making a decision to start an IVA you need to understand these in the context of your circumstances.

1. Publicly listed
If you start an IVA, although the agreement is not specifically publicised in a local newspaper, your name and address and the fact that you have started an IVA will be listed in the Insolvency Register. This document is freely accessible via the internet. As such anyone can find out that you are in an IVA if they want to make a search.

2. Homeowners must release equity
If you are a homeowner, you will be obliged to release equity from your property to increase the amount you repay to your creditors. The equity release process is governed by strict rules so you will know exactly where you stand before you start your IVA.

3. Your Living Expenses will be restricted
During your IVA you will be required to live within a restricted living expenses budget. You will have to pay all of your surplus income into the Arrangement. If your income increases your payments may also increase for the remainder of your IVA.

4. Relatively inflexible
Once you have started an IVA you cannot simply decide to reduce your monthly payments. Significant changes can only be made with the agreement of your creditors. If your circumstances change any you are no longer able to make your payments, your IVA may fail and you will still be liable for your debts.

5. Negative effect on credit rating
If you start an IVA, your credit rating will become significantly worse and will normally remain poor for a minimum of 6 years. For more information see How IVAs affect your credit rating.

6. Only unsecured debts are included in the arrangement
Only the unsecured debts that you specifically list in your IVA are included. If you miss any debts out they will not be included and you may find it difficult to add them later. Secured debts such as your mortgage are not included and these must be paid. You must also continue to pay your other priority payments such as your rent, fines, child support payments and utility bills.

Additional information

More information about the solution is available in the left hand column. However only a brief overview is given here. For more details and advice please see one of our dedicated information websites:

www.ivainformation.com
www.beatmydebt.com

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