The consequences of IVA are normally small, but each person entering into an IVA should explore the consequences of an IVA to make sure they understand the potential IVA’s downsides.
So what are the consequences of an IVA.
In brief, each individual IVA will have its own downsides, depending on the surrounding circumstances. And because all IVAs are unique, its fair to say that the downsides change too.
In general terms these are the consequences for taking out an IVA.
- Credit Rating Damage : Most people understand that reaching any agreement with their creditors is likely to have an impact on their credit rating, and entering into an IVA is no different. The IVA will be marked on the debtor’s credit file, and the reference to the IVA will remain there for 6 years.
- Legally Binding : The IVA is a legally binding agreement. Now this can be seen as a benefit in most circumstances, because the creditors are legally bound by the IVA also. However, being legally bound to the IVA restricts the debtor too. The financial obligations that come with the IVA can be tough, for example having to share windfall payments with creditors, so be aware that what the creditors may be expected to lose on the swings, they will be looking to make up for on the roundabouts, so to speak!
- Scrutiny : The IVA is an agreement that requires supervision. The supervision is provided on behalf of the creditors by an Insolvency Practitioner, and as part of the IVA supervisory process a debtor will need to provide access to all their financial affairs. Failure to do so could result in the IVA failing.
- Lack of Flexibility : The creditors will insist that the debtor is contributing into the IVA whatever they agreed to contribute in to the IVA at the creditors meeting. If there is a change in circumstances they will allow an IVA variation meeting to be called to assess the need to reduce the IVA payments, however, modifications to the IVA payments are not agreed to without good reason, and cannot be imposed upon the creditors, so should not be expected.
- Time Period : Although an IVA can sometimes consist of one ‘Lump Sum‘ payment, in general an IVA will normally last for 5 years. Much can change over a 5 year period, if you cast your mind back over the last 5 years you’ll see what I mean. Its not unreasonable to imagine meeting a new partner, becoming engaged, then marrying and starting a family all within 5 years, in fact, most people do. So make sure you have the stamina to complete the IVA successfully.
- Budgeting : The IVA payment should always be affordable. However, your payment will be set according to your budget at the time you enter the IVA. Be prepared to live within that IVA budget, and be prepared to make the inevitable sacrifices that will be required during your IVA.
These are just some of the general consequences of an IVA.
If you would like to get to the bottom of whether or not an IVA is the best solution of you you need to contact My IVA Adviser and ask for an IVA consultation.
My IVA Adviser operates a No IVA = No Fee policy
The IVA consultations are free and confidential. You will have the benefit of discussing your personal circumstances with an IVA specialist, and they will point out all the consequences of an IVA based on your personal circumstances.
To arrange a consultation call 0800 088 7503 or fill out the quick contact form on the side of this page and we’ll call you.
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