Individual Voluntary Arrangement (IVA): What You Need to Know Before You Commit
Is an IVA Your Golden Ticket?
You’ve likely clicked on this section because you’re considering going into an Individual Voluntary Arrangement or its shortened name, an ‘IVA’. Something might be niggling away at the back of your mind. The insolvency practitioner seemed just a bit too pushy. They made it sound so easy: “5 years and you’re done, no more debt”. Always trust the feeling in your gut when you think something doesn’t seem quite right and makes you look deeper.
Hold on a minute!
Just one quick point before you continue! It’s important to know that this page provides a brief overview of Individual Voluntary Arrangements (IVAs). To get the full details and understand this subject, click here or at the bottom of the page in the purple box.
Let's begin
Whilst an IVA may seem like a fantastic idea, there are some important red flags that you need to be aware of before you commit.
So, let’s start with “What is an IVA?”
What is an IVA?
The Basics of an IVA
An IVA is a legally binding agreement you can make with your creditors to pay off all or part of your debts. It is also a form of insolvency designed to prevent people struggling to pay their debts from losing their assets.
Nowadays, people without any assets are being granted an IVA. If you do not have any assets to protect, you should not consider an IVA. If you possess assets and your debts are all unsecured, insolvency options like an IVA should be regarded as a last resort. IVAs significantly impact your credit file, come with restrictions that may affect you significantly, and can lead you to bankruptcy if you cannot maintain your payments.
What can I do instead of an IVA?
Check If Your Debt Is Statute-Barred
Before considering your options, your first step should be to verify whether your debt is statute-barred. If your debt is over six years old and you haven’t made any payments or communicated about it, it may be statute-barred if it has not gone to court. More details about this are in the article in the purple box below. In short, it may mean that your debt could be addressed with a straightforward letter (we have that covered for you, too).
Explore Alternatives to an IVA
If your debt isn’t statute-barred and you fully understand what an IVA is (remember we have a detailed article about this in the purple box below), its potential impacts, and its pros and cons based on your situation, it’s now time to explore alternatives that may not be as drastic.
Need help speaking to your creditors?
Let us do the work for you. Whilst you focus on the more positive things in life. You can book a 10-minute discovery call with The Real Debt Guy. We got you!
Unsecured Debt Options
If your debts are unsecured, you can make token payments toward them according to the Financial Conduct Authority (FCA) Handbook section 7.3.5. We provide more details about managing financial difficulties with unsecured debts here, covering each option in detail. Essentially, you can address these types of debts without pursuing the insolvency route.
Secured Debt and IVAs
If your debt is secured debt, it's unlikely that a creditor will accept it into an IVA. If an insolvency practitioner tells you that secured debts will be accepted, that’s a major red flag. The creditor must give permission for this to happen. Secured debts include things like a mortgage. If you are struggling with this, you can tackle it by heading to our article 'What to do if you can't pay your mortgage'. You’re not alone; we got you.
Making the Right Decision
It is essential to always gather all the facts before signing on the dotted line. What you hear may sound appealing initially, but your actions often have consequences. You must ask yourself, “Are you ok with the consequences?” and “Is there another way?”
We are here to provide you with all your options, unbiased information, and potential consequences. This way, you can make your own decision without feeling pressured. We want you to be in control at all times. Remember, any decision you make is the right one because it’s you who made it, and you know your situation best.
