What are the Advantages of an IVA?
One of the main advantages of an IVA is that it’s legally binding. Once the contract is in place your creditors have to leave you alone, including the phone calls and letters.
- Unsecured debts that are still outstanding at the end of the IVA period are written off - possibly 50% - 60% of the debt balance you begin with.
- You will also be able to set a fixed monthly household budget because your debt management adviser will help you fix an IVA repayment at a monthly amount that you can afford to repay.
- With an IVA your mortgage or rent payment along with your utility bills are always treated as a priority.
What are the Disadvantages of an IVA?
While it sounds a great idea on the surface, there are some disadvantages to using an IVA as a debt solution. Make sure you check these out before finalizing the contract – remember it’s legally binding.
One of the most important factors with an IVA is that you have to get creditors owning 75% of your debt s in agreement before you can go ahead and start the IVA. Creditors owning over 25% of your debt could block your application and if so you’ll have to consider another debt solution such as bankruptcy or a debt management plan.
- Even with a legal debt solution it takes time for creditor notification - so even though creditors shouldn’t harass you further, it could take a number of weeks for them to stop calling you.
- Although you make your agreed monthly payments on time, it will be 6 years from the starting date before the IVA will be removed from your credit file.
- Failure to make the agreed payments could result in your creditors moving you towards filing for bankruptcy – this will have a severe affect on your financial future.
- Using an IVA could create future credit problems so make sure it’s the best of the solutions available before settling on this option of debt management