IVAs do have downsides.
The IVA downside most often commented on here at My IVA Adviser is the rigid repayment structure of the IVA.
On the face of it, the prospect of entering in to a legally binding arrangement which normally requires a minimum of 60 payments can be quite daunting.
But, after taking a closer look at an IVA and how an IVA actually works, many people change their minds and agree that this IVA downside actually becomes one of the IVA upsides instead.
In most cases an IVA will have a 60 month term and, because the IVA is a legally binding agreement, people perceive this length of time as a downside to the IVA.
They recognise that their IVA payments will not be very flexible.
Quite naturally, they are concerned their circumstances may change whilst in an IVA and, quite naturally, they are frightened of the consequences of not being able to afford their IVA payment if things take a turn for the worse.
However, because they have given themselves the legal protection of the IVA, there is a system in place that enables changes to be made, without creditors being able to have a say.
Their Insolvency Practitioner has the discretion to reduce the IVA’s payments by up to 15 %, without the need to seek creditor’s approval.
Furthermore, the Insolvency Practitioner has at their discretion the power to instigate a payment break of up to 6 consecutive months when necessary, to help with more serious payment disruptions.
In extreme cases, the Insolvency Practitioner can request a permanent change to the payments by calling a variation meeting, if a change in circumstances persists.
So, the IVA protects the debtor from uncooperative creditors.
And, because the payment term is ‘legally’ fixed to a specified number of payments, (as opposed to an open ended Debt Management Plan), the IVA will finish at a specific point in time, legally writing-off any unpaid debts.
So, for many, the fixed term of the IVA switches from being from an IVA downside to an IVA upside.
A more comprehensive list of “The pros and cons advantages and disadvantages of an IVA” can be found in this article, but if you would like to know more about the downside of an IVA call us on 0800 088 7503
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