IVA drawbacks are few when compared to the advantages an IVA can offer.
Nevertheless, it makes good sense to investigate the IVA drawbacks at an early stage of the decision process, and establish the effects that the IVA drawbacks will have on your potential IVA.
Every IVA is different. By this we mean that the circumstances surrounding each IVA are different.
Therefore the IVA drawbacks will be different in every case, so to try and list all the IVA drawbacks becomes almost impossible.
So instead we’ll discuss the IVA drawbacks that we feel are the most important for you to know about.
IVA drawback No1 : 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.
IVA drawback No2 : An IVA will impact on your credit rating and will be marked 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.
IVA drawback No3 : The IVA is a very rigid repayment plan, and once the IVA repayments have been agreed you will not be able to adjust the payments without good reason. Failure to maintain your payments could cause your Insolvency Practitioner to fail the IVA, which could result in bankruptcy proceedings being taken. Something which is better avoided if possible.
IVA drawback No4 : The IVA is a supervised agreement. Your personal finances will be monitored during the 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 you ability to make your IVA repayments.
IVA drawback No5 : 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 will 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.
So as you can see, depending on your personal circumstances, these different IVA drawbacks are worth knowing, just so you can prepare yourself for the possible sacrifices that will need to be made.
For more information regarding IVAs visit our articles page.
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