What are the downsides of an IVA?
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 particular IVA downside actually becomes one of the IVA upsides instead.
Rigid Repayment Structure
In most cases an IVA will have a 60 month term and, because the IVA is a legally binding agreement, people perceive this duration as a downside to the IVA.
They recognise that their IVA payments will not be very flexible.
Quite naturally, they're concerned their circumstances may change whilst in an IVA and they're frightened of the consequences of not being able to afford their IVA payment, should things take a turn for the worse.
Potential payment reduction
After the changes to the IVA's terms and conditions, introduced through the IVA Protocol in 2008, there's now a system in place that enables adjustments to be made to the monthly payments 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.
Potential payment break
Furthermore, the Insolvency Practitioner now has the discretion to instigate a payment break of up to 6 consecutive months when necessary, to help with more serious payment disruptions.
If necessary, the Insolvency Practitioner can propose a further change to the agreement by calling a variation meeting, if a change in circumstances persists.
So, the IVA protects the applicant from uncooperative creditors, yet gives flexibility to the payment structure of the IVA.
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.
Professional IVA Advice
The team behind My IVA Adviser have been helping people understand IVAs for the past 10 years.
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