With any financial agreement there are bound to be risks or disadvantages for you.  We have a list of these disadvantages to help you better understand how the IVA’s work.  To make sure the IVA is something suitable for you, you need all the answers and professional advice available to you.

The first disadvantage is that the IVA is five years long.  A bankruptcy will last for 3 years.  However, there is an even bigger downside to the bankruptcy as far as financial credit after the bankruptcy is over. 

A risk you must take is in your home equity.  When you have equity saved up in your home or other valuable assets you may need to use all or part of that amount for the IVA payment.  In other words if you have a pension, equity or other valuable asset to pay the debt and satisfy your creditors they may ask that you pay the IVA in a lump sum.  If it will pay the entire amount that is great; however if the assets are not enough to pay the entire amount you could still owe monthly repayments.

You do have to have a specific level of debt in order to appeal to your creditors for an IVA.  Unsecured debt must total 12,000 pounds.  You also need to be able to afford at least 180 pounds per month for a monthly repayment agreement.

During the IVA you are not able to have an unsecured borrowing.  This would include store credit cards or regular credit cards.  They would have to be cut up.  You can use prepaid credit cards, change your mortgage or take out a new mortgage.

If you fail to stick with the agreement you make with an IVA and the creditors you could face bankruptcy.  You will also be forced into a court to determine the repercussions of not paying the IVA as agreed.  In extreme circumstances for IVA’s or failure to pay an IVA you could see your paid holiday income go to the creditors.

An IVA will damage your credit scores and history.

With IVA’s you will be paying back more to the debts than you would a bankruptcy.  In most cases an IVA will require 40 to 50 percent of the debt owed to be paid with the arrangement.

You also need to include all creditors.  You cannot exclude any creditor from the IVA.  Another disadvantage with this is that the creditor holding 75 percent of your total debt must agree to the IVA or the entire arrangement will not proceed.

The last disadvantage is the cost.  There are fees associated with the arrangement on top of the amount owed for the debt.  This could be too steep a price for you.

While there are disadvantages there are also advantages to consider before making the deal or turning away from a deal.  The most important aspect of an IVA is that it offers control of your debts and helps you become debt free with paying less than all the amount owed.