IVA; Pros and Cons to Consider

individual voluntary arrangement

By seeing things from the perspective of an insolvent debtor, one can easily come up with the advantages and disadvantages or the pros and cons of an individual voluntary arrangement (IVA). Once an IVA is set up by an IVA company or insolvency practitioner (IP), you—the debtor—can look forward to enjoying several advantages—provided you comply with the terms agreed for the IVA. 

There are, however, some cons of an IVA that you may want to consider before entering into such an agreement. Starting with the advantages, the following are the IVA pros and cons.

The Advantages or Pros of an IVA

There are several advantages of an IVA. Some of these may be less relevant to your personal circumstances, however, being familiar with them will serve you well.

Affordable Payments

An IVA arrangement ensures that you pay what you can afford to pay. Your IVA company or advisor will determine your contributions based on your affordability rather than making you pay a fixed amount for the debt that you owe.

A Fixed Time Period

An IVA will last for a fixed duration, which is typically around five years. Once the duration has been agreed to by your creditors, they cannot ask to extend the time period for the payments in case they have a change of mind at some point during the IVA tenure. Once the IVA period is over, you will be free of debt, even if there is money you still owe.

Protection of Assets

By stopping creditors from selling your property to reclaim the money, an IVA protects your personal property or assets.

Avoid Legal Action

Your creditors can take no further legal action against you as an IVA is legally binding and stops your creditors from acting against you. You should read Federal Bankruptcy Exemptions Explained here. Consult a bankruptcy law firm for additional guidance.

Employment Protection

Unlike bankruptcy, an IVA does not dictate what jobs you can and cannot do. Therefore, an IVA is a much better option than bankruptcy for people who are concerned about losing their jobs, but you can still consult with a bankruptcy attorney such as a chapter 13 bankruptcy lawyer for a professional opinion. If you are unsure whether an IVA will affect your job, it is best to check with your employer, and look at your contract of employment and the terms of any professional memberships you may have. You may also require the services of an HKM employment lawyer to translate the legal jargon in your contract.

Prevent Your Debt from Increasing

After you enter an IVA, you are asked to pay a set or fixed amount and no interest can be added to that amount, neither can you be charged a fee for making late payments. So, the debt you owe remains the same for the entire duration of your IVA.

The Disadvantages or Cons of an IVA

As mentioned earlier, there are IVA pros and cons. The pros have already been discussedandthe following are the cons or disadvantages of an IVA:

Credit Rating is Impacted

An IVA can have a significant impact on your credit rating for six years, making it incredibly difficult for you to obtain credit during this time.

Fixed Repayment Schedule

Your IVA will have a fixed repayment schedule,and if you do not make your IVA payments on time and at the expected level, it will be considered as a breach of contract.

Windfall Clause

The IVA agreement requires you to declare any windfall or financial gift you receive as this will used to make contributions to the repayments to your creditors.

No Cancellation

You cannot simply stop making IVA payments. If you ask to terminate your IVA, then you may be made bankrupt as a result.

There are many more IVA pros and cons to know aboutand you can get this information by getting in touch with us today!

Image Credits: IVA from designer491 /Shutterstock