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 carry on! It’s important to know that this page is 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?
An IVA is a legally binding agreement you can make with your creditors to pay off all or part of your debts. It’s also a form of insolvency. It was designed to prevent people struggling to pay their debts from the risk of losing their assets.
Nowadays, people without any assets are being granted an IVA. If you do not have any assets to protect, you shouldn’t be considering an IVA. If you have assets and your debts are all unsecured, insolvency options like an IVA should be a last resort. IVAs impact your credit file significantly, come with restrictions that may affect you greatly and can also lead you to bankruptcy if you are unable to maintain your payments.
What can I do instead of an IVA?
Before considering your options, your starting point should be to check if your debt is statute-barred. If your debt is over six years old and you haven’t paid towards or communicated about it, or it has not gone to court, it may be statute-barred. You can read more details about this in the purple box below the article. In short, it may mean that your debt could be handled with a straightforward letter (we have that covered for you, too).
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), along with the potential impacts and its pros and cons based on your situation. In that case, it’s now time to look at alternatives that may not be as drastic.
Unsecured Debt
If your debts are unsecured, you can make token payments toward them under the Financial Conduct Authority (FCA) Handbook section 7.3.5. We provide more details about handling financial difficulties with unsecured debts here, covering each option at length. Essentially, you can handle these types of debts without going down the insolvency route.
Secured Debt
If your debt is a secured debt, it's unlikely it will be accepted into an IVA by the creditor; if you are told by an insolvency practitioner that secured debts will definitely be accepted, that’s a major red flag. Permission has to be given by the creditor for this to happen. Secured debts are debts like a mortgage, for example. 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', which you will find in the purple box below. You’re not alone; we got you.
Conclusion
It is so essential that you always gather the full facts before you sign on the dotted line. What you hear may sound great initially, but your actions usually have consequences. You must ask yourself, “Are you ok with the consequences?” and “Is there another way?”.
We’re here to give you all your options, unbiased information, and possible consequences. That 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.
