Is an IVA Worth It?

When considering your options for managing debt, there are several options available depending on your individual circumstances. These include bankruptcy, debt relief orders, debt management plans, administration orders, and individual voluntary arrangements (IVAs). With a number of options available, it may be confusing to know just which is likely to have the best and fairest outcome, enabling you to meet daily life expenses yet with the least impact on your future financial situation and reputation. One such option is an individual voluntary arrangement (IVA), but with an expected five-year commitment, is an IVA worth it?

Is an IVA a Good Idea?

Individual voluntary arrangements (IVAs) are considered an attractive alternative to bankruptcy as according to UK Government debt advice An IVA can give you more control of your assets than bankruptcy. With that in mind, you may be wondering is an IVA a good idea?

Some factors to consider in assessing “is an IVA worth it”:

1. Do you meet the eligibility criteria for an IVA?

To be eligible for an IVA, you must have debt of at least £10,000 to two or more creditors, and the majority of the debt must not be to HMRC. Is an IVA a good idea? If you don’t meet the eligibility for an IVA, then no is the easy answer.

2. Can you afford the set up and on-going costs of an IVA?

An individual voluntary arrangement has both a set-up fee and a monthly handling fee paid to the nominee (an insolvency practitioner) for costs of administering the IVA. If you can afford the set-up costs and have surplus income each month to repay as per the IVA proposal, then perhaps yes is the answer to is an IVA worth it?

3. Is an IVA an attractive option for your creditors?

To be granted an IVA, 75% of your creditors must agree to the IVA proposal. Depending on your assets, extent and reason for debt, and likelihood of repayment, your creditors may or may not agree to the proposal. You need to consider carefully how committed you are to honouring the monthly repayments as per your IVA proposal. Remember, an IVA is a legally binding arrangement that’s not to be entered into lightly. If your creditors don’t have confidence in both your ability and commitment to repaying the debt, they may be questioning is an IVA a good idea for them, and are unlikely to agree to the IVA proposal.

4. Are your creditors in the European Union (EU)?

IVAs are available in England, Northern Ireland and Wales, with Scotland having their own alternative to IVAs (called Trust Deeds). If your creditors are in those locations, then interest will be frozen from the start of the IVA and creditors cannot pursue legal action against you to reclaim debt. If your creditors are in the EU, they can still take legal action against you during your IVA. As being free from court action is a major advantage of an IVA, if your creditors are in the EU you may need to consider is an IVA worth it?

5. Impact on your credit score

While taking out an IVA will affect your credit score for the life of the IVA, any option for debt management will have a similar effect. Your commitment and ability to repay a significant amount of the debt through the IVA may reflect better for future loans or financial commitments making IVAs worthwhile.

6. Becoming debt free

The main purpose of an IVA is to become debt free in a manner that’s affordable while still being fair to creditors. At the end of the life of the IVA (usually five years), a large proportion of the debt (if not all) should have been repaid, and the remainder is written off. If you’re a homeowner, you may be asked to contribute equity from your home in the final year, and if you aren’t a homeowner then the IVA may be extended for a sixth year to ensure a fair outcome for creditors.

With all these factors in considering is an IVA worth it, seeking professional advice can be the best next step for your peace of mind as you secure your financial future.

Professional Tailored Advice to Determine If an IVA Is Worth It for Your Circumstances?

Irwin Insolvency has a team of experienced insolvency experts able to assess whether an individual voluntary arrangement is a good idea in your individual circumstances. Contact Irwin Insolvency today for professional and tailored advice to understand your options and assist you in creating a stronger future.