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Individual Voluntary Arrangements - Disadvantages
- If you are a home owner, creditors will
expect you to release some of the equity in your property towards the end
of the arrangement by way of a remortgage.
- You will not be able to take further unsecured borrowing for the
duration of the IVA.
- Credit reference agencies such as Equifax and Experian keep records
of IVAs on their files for 6 years, but the effect to you credit
rating will not be a damaging on as bankruptcy. For example, it is
possible for an person in an IVA to obtain a mortgage or finance to
replace their car provided the IVA is progressing satisfactorily.
- If you enter into an IVA and fail to maintain your agreed payments,
you could risk being made bankrupt. However, if your personal
circumstances change (such as redundancy), it may be possible to
renegotiate your IVA payments.
- The IVA agreement is not undertaken for free. You will need to use a specially licensed person called an Insolvency Practitioner
who will charge fees. However, you will not be expected to pay these fees directly
yourself as IVA fees are taken from your standard monthly payments.
In effect your creditors pay these fees for you out of the money they collect from
you during the 5 year period of the IVA.
- IVAs are expected to be for a longer period than bankruptcy (ie
5 years).
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