IVA Downsides

There are many companies out there who advertise IVA help, however many fail to highlight the negative aspects of an IVA.

Below we explain some the disadvantages of an IVA:-

Home Equity.

If you own a home or have any property which a loan can be secured against, normally, you will be expected to re-mortgage to raise money to pay into the IVA.

An IVA is not a guaranteed way of avoiding Bankruptcy.

If you cannot keep up with the agreed IVA payments, you could still be made bankrupt. This may leave you in a worse financial position than if you chose bankruptcy in the first place.

IVA providers cannot guarantee that the IVA will be accepted.

It is the decision of your creditors if an IVA proposal is approved. Therefore the proposal is the most important part of the process. The proposal must be a reasonable deal for both you and your creditors.

If you receive a windfall you may need to pay this into your IVA.

When you enter an IVA is like saying to your creditors saying this is what I can pay per month now, but If i can afford to pay more in future, i will.

If your circumstances don't change, the terms of the IVA do not change.

IVA's usually include a 'windfall' clause. Each year, your IVA is reviewed. If you are financially better off by means of a pay increase, inheritance etc, then this is taken into account and you may be required to pay more per month.

Not disclosing available funds is an offence. Usually you would pay half of any windfall into the IVA.

Minimum payments and debt written off

Writing off 75% of the debt is a maximum, not typical value. The guidelines for minimum monthly payments are £200 and an IVA lasts for 60 months, meaning must be able to payback at least £12,000 over 5 years.

Therefore, to write off 75% you must has at least £48,000 of debts and be able to prove a surplus income of just £200 to pay towards your debts each month.

Whatever course of action you take to tackle unaffordable debt repayments, there will be risks and disadvantages with respect to other solutions.

Whatever your circumstances, our aim is to make your finances better.