The 5 main IVA drawbacks
IVA drawbacks are few when compared to the advantages that an IVA can offer.
But, nevertheless, it's a good idea to investigate the IVA drawbacks at an early stage of the decision process, in plenty of time to understand how the IVA drawbacks may influence your decision to enter an IVA.
Each IVA Is Unique
Every IVA is unique and the circumstances surrounding your IVA will be different from any other.
It's fair to say, therefore, that the IVA drawbacks surrounding your IVA will differ from every other IVA case too.
Rather than trying to guess your circumstances, we've opted to detail the 5 IVA drawbacks that most people would recognise as having some bearing on their IVA.
These are the 5 drawbacks relevant to the majority of IVAs:
- Longer repayment term than Bankruptcy :
IVAs are usually set at a 5 year repayment term. Compared to bankruptcy, the IVA will last 2 years longer than a bankruptcy Income Payment Agreement (IPA). This can equate to a significant amount of extra repayments, which would not be payable in bankruptcy, so The IVA will not only run for a longer time period, but will cost more in repayments too when compared to bankruptcy.
- Damage to your credit rating :
An IVA will impact on your credit rating and will be recorded on your credit file for 6 years. This isn't such a big deal whilst you are in the IVA, because you aren't allowed to borrow money during the IVA anyway, but the IVA will still be on your credit file for 1 year after the IVA has completed successfully and, therefore, obtaining credit for the first year after the IVA will be difficult if not impossible.
- Not much flexibility :
The IVA is quite a rigid repayment plan and, once the IVA repayments have been agreed, you will not be able to simply adjust the repayments because you feel like it. Failure to maintain your payments could cause your Insolvency Practitioner to fail the IVA, which could result in bankruptcy proceedings being taken against you. Something which is better avoided if possible. That said, your Insolvency Practitioner has the ability to give a 6 month payment break when necessary and can reduce the IVA payment by up to 15% under the new IVA protocol.
- Annual reviews :
The IVA is a supervised agreement. Your personal finances will be monitored during annual reviews of your IVA. During the annual review the IVA supervisor will expect to be given access to bank statements, income details and any other paperwork needed to enable them to assess your ability to make your IVA repayments. If they conclude you can afford an increase in your payments, your payments will rise.
- Luxury assets at risk :
IVAs are good at protecting your largest asset such as your house and home, but if you own other sizable assets such as a motor home, a caravan, a foreign holiday home, a time-share apartment or even an expensive vehicle, they could be at risk should your creditors demand for them to be sold off. If they do, the raised funds would need to be introduced into the IVA as part of the arrangement.
As you can see, these different IVA drawbacks are definitely important enough to warrant you being made aware of, if for no other reason than so you can prepare yourself for the possible sacrifices that you may need to make.
Take this link for further information about the pros and cons of an IVA.
Professional IVA Advice
There is no better time to seek professional IVA advice than prior to entering into an IVA.
That's why the team behind My IVA Adviser offers private consultations to those people who want to understand the IVA solution in detail, before they make their decision on which debt solution they want to take.
Due to our extensive knowledge and experience, we're able to highlight each aspect of the debt solutions available to you, when applied specifically to your personal circumstances.
There's no obligation or pressure, just simple straight talking, clear advice on the debt solutions available to you.
If you'd like to take advantage of a private consultation, simply call 0800 088 7503 to speak to one of our IVA advisers right now.
Alternatively, complete this form and one of our advisers will contact you at your preferred time.