Some Pros And Cons Of IVA
There’s a lot that you should know about Individual Voluntary Arrangement (IVA). To make a well-informed decision regarding it, you’ll want to familiarize yourself with some of the pros and cons it comes with. There’s a lot to think about when it comes to choosing whether or not to go with an IVA.
As a completely independent advisor, we have a singular goal of ensuring that you get into a payment plan that allows you to become debt-free as quickly as you can. To effectively accomplish this, we have a squad of experienced and professional financial experts to assist. In this article, you will learn about some of the pros and cons of IVA to help you make a well-informed decision.
- Affordable Repayments
One of the good things about IVA is the ability to make affordable payments. After all, you’ll only be required to pay whatever you can afford to pay. Thus, you will have an advisor looking over your finances to figure out what you could comfortably afford to pay monthly. They can do this to help you make the payments more affordable for your family. The recommendation will then be sent to your creditors and they will be made aware that you cannot make bigger payments than the allocated amount.
- Get Rid Of Your Debt
The good thing about an IVA is that it’s only going to last for a finite amount of time. It’s a fixed-period payment plan. It will typically last around 5 years or so. Once you have creditors agreeing to the respective timeframe, you won’t have to worry about them changing the terms of the repayment. They also won’t be eligible to ask for more payments to be made in the future. Once the payment period is over, it’s over for good. In the end, you are free of debt no matter if you still technically owe money or not.
- It Protects Your Assets
Having an IVA is a good way to protect your assets. It’s a good way to protect your assets like your home. It keeps any creditors from being able to force you to sell your assets to make payments on your debt.
- Gets Rid Of Legal Action
Because you will be entering a legally binding agreement, it’s not going to set you up for future legal action. The creditors seeking payment restitution won’t be able to take further legal action against you when it comes to getting back what they are owed.
- Keeps Your Debt From Getting Bigger
You don’t have to worry about your debt getting larger and larger over time. Once you have agreed to an IVA, you will have a specific amount set. Thus, it keeps your creditors from continually adding more and more interest on top of the amount that you owe. This means that you aren’t going to accrue any more interest payments or fees.
- No More Phone Calls
One of the biggest issues with owing creditors is the harassment that comes in the form of phone calls. If you are constantly being hassled by these creditors asking you to make payments, you aren’t alone. Once you enter an IVA, you don’t have to worry about getting them any longer. Once you do enter an agreement, they cannot contact you directly anymore. Instead, they will need to issue their communications with your Insolvency Practioner rather than directly to you.
- It Protects Your Reputation
While filing for bankruptcy is an option, it’s not going to help protect your reputation. IVA isn’t made public. It also doesn’t change your tax code. Thus, when you do file for it, employees won’t be able to see it. It can help you protect your reputation across the board because it’s private.
- Protects Your Job
Bankruptcy is public. It’s different from bankruptcy because there are no restrictions on what jobs you can and can’t do after you file it. This makes it a much more optimal option considering you don’t have a lot of restrictions that you have to adhere to. This is especially true for government and bank employees.
Is An IVA The Best Option For Me?
An IVA can be the best option depending on your situation. They are legally binding. Likewise, there is a finite period that they are eligible. It typically lasts a good 5 to 6 years at most. It helps you protect and retain your assets. It also keeps your payments under control. That being said, it does have a lot of restrictions. If it does fail, there’s always a risk of having to file for bankruptcy. There are also specific professions that are affected by insolvency. Because of this, you will want to go over your employment contract before going this route. You can utilize our quick online assessment to figure out which option is right for you.
- Your Credit Will Take a Hit
It’s always worth mentioning that your credit is going to take a hit when you opt for an IVA. It’s going to negatively impact your credit score for 6 years or longer. This can keep you from being able to take out credit for a significant length of time.
- Windfall Clause
There is a windfall clause that you will need to think about. When you agree, you will need to declare that any gift that you receive will be put forth toward your creditors.
You will have your financials reviewed every single year. This means that you will need to increase your payments if you suddenly have a chance in income or financials.
- Bank Restrictions
You are only going to be able to open a basic bank account during the period in which the IVA is applied. This keeps you from having a bank that offers a credit card, checkbook, or overdraft.
- You Can’t Cancel
It’s a legally binding agreement. Because of this, you won’t have the option to stop payments. You will need to make payments consistently and there’s nothing you can do to stop it. If you do terminate the agreement, you would likely be made bankrupt.
- There Are Budget Restrictions
You will be tasked with having to manage all of your finances during the entire period. You will typically only be allowed a relatively modest allowance throughout the time the IVA is in effect.
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