The Advantages And Disadvantages Of An IVA
An can assist anyone who is experiencing problems clearing their debt. It is an exceptionally tempting option to homeowners who would risk losing their home if they were made bankrupt.
You could benefit from an IVA if;
Your lenders have already refused to accept an informal debt management arrangement
You previously had an informal arrangement, but you could not meet its terms.
You are in debt to so many creditors that an informal debt management arrangement would be impractical. You could be made bankrupt, alternatively you have already become bankrupt and you want to reverse that position. You formerly had an informal arrangement, but you could not keep up withits provisions.
Your lenders have declined an informal debt management agreement
You could be made bankrupt, alternatively you are currently bankrupt and you want to alter that position.
You have so many creditors that an informal Debt Advice arrangement would not be practical.
You may have a start up company which you could not keep running if you became bankrupt. You would lose your job if you became bankrupt, jobs such as solicitor, accountant, the armed forces, police. You have a significant amount of disposable capital but it is still not enough to completely repay your lenders. You want a formal arrangement with your creditors to accept that lump sum and write off the balance of what you owe.
You have equity in your house. You wont necessarily lose your house if, with the agreement of the IP and your creditors, it can be kept out of the IVA. However, your lenders will usually ask for the maximum amount of the equity in your house as they can acquire. With an IVA you are less hampered restricted as with bankruptcy. EG, with an IVA or Individual Voluntary Agreement you are not obliged to inform your building society. Therefore, you will still be able to use your bank account.
And the disadvantages?
If you fail to comply to the terms of your IVA, then the Insolvency Practitioner who is supervising your Individual Voluntary Agreement or your lenders, can ask for your bankruptcy.
If three quarters of your creditors fail to acquiesce to your proposed Individual Voluntary Agreement (IVA) you are subsequently back to square one. It will be 12 months before you can make another IVA proposal. You need to get it right.
If you are a mortgagee, it could be that under the terms of the Individual Voluntary Agreement (IVA) you have to sell your house. An alternate method is to include a clause in your IVA whereby you get your home appraised after an agreed number of years with a view to releasing the “equity” in your home at that time, to your creditors. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your financial position alters and you are unable to afford the repayments, unless your Insolvency Practitioner can persuadeyour creditors to agree to a revised arrangement, your IVA will terminate. This could mean you are facing bankruptcy.