Pro's and Con's of an IVA | IVA (Individual Voluntary Arrangements)

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The Pro’s and Con’s of the IVA process

The page which is most “hit” on our website is this pro’s and con’s page.

As part of the process of beginning an IVA, a statement is taken of your assets and liabilities, income and expenditure. The purpose of this is to ascertain whether or not enough disposable income exists to propose the IVA. Alongside this the IP considering the matter will produce a bankruptcy v IVA comparison which will show the difference in return between the two options. To get the best chance of success it will be necessary to show that there will be a greater return for creditors with an IVA.

By comparing the IVA pros and cons it will help you understand the IVA process better.

IVA Pros

With an IVA your creditors can not contact you.
With an IVA you only pay back what you can afford.
In an IVA your name will not appear in the local paper. This differs from bankruptcy where it is a legal requirement.
An IVA is private so your friends and family will not find out about it.
After an IVA is completed you are debt free.
An IVA acts as a safeguard to losing your home.
A business owner can continue to trade with an IVA
A person subject to an IVA can continue to have a current account. No credit will be allowed without the agreement of the Supervisor.
There are higher dividends to creditors with an IVA.
An IVA will have a person debt free in up to 5 years.
Up to 75% of your debt can be written off in an IVA
An IVA provides protection from court action.
An IVA will stop the creditors making demands
An IVA will help repair a person’s credit rating.
There is no publicity with an IVA
You have more say in the choice of assets made available to the creditors in an IVA.
You can continue to work in the financial sector (FSA) or HM Armed Forces / Police Force with an IVA, where in bankruptcy this would not be possible.
You can continue to be a company director with an IVA. In bankruptcy you cannot.
There is no professional disqualification with an IVA.
You can continue to hold public office positions with an IVA.
The costs of an IVA maybe lower than bankruptcy where the assets are similar.
You keep your assets in an IVA subject to qualifications surrounding the house.
The creditors prefer IVAs because they can claim tax relief against bad debts.
Creditors who do not vote for an IVA are still bound by the IVA.
Creditors who vote against the IVA are still bound by an IVA.
There are fewer restrictions in an IVA compared to bankruptcy.

IVA cons

The IVA period is longer than bankruptcy. An IVA can last up to 5 years, whereas bankruptcy is just 1 year and in certain circumstances it may be over in as little as 6 months.
An IVA just like a bankruptcy is recorded on the Individual Insolvency Register, which is searchable by the public if they wish to look at it.
With an IVA you cannot leave out some creditors. If you do then the creditors can still pursue you if they seek leave of the court.
The IP will monitor wage slips and salary updates each year. If you earn more then you pay more in to the IVA. The Supervisor is responsible for getting the creditors the most disposable income per month.
5% of 5 years IVA cases actually can last 6 years.
With an IVA the insolvency practitioner may request some of the equity in the property is released as part of the IVA deal with creditors. If this cannot be taken out the IVA term maybe extended.
An IVA cannot guarantee the protection of the home because the creditors may insist that the assets are still attackable.
The cons of an IVA is that you must have at least £15000 of debt, and at least 3 creditors.
To do an IVA you must be able to afford to pay at least £200 per month.
An IVA is what we call a "golden handcuffs deal". It is a great deal but you are locked in for up to 5 years.
People in an IVA cannot get further unsecured borrowing.
An IVA will show up on the credit report for up to 6 years.
An IVA means the person will need to pay back substantially more than an IVA.
An IVA must have the agreement of at least 75% in value of the total debts, of those who decide to vote.
If an IVA fails then the person will be made bankrupt.
An IVA cannot guarantee the protection of the home because the creditors may insist that the assets are still attackable.
An IVA is set up and run by an insolvency practitioner (IP). Some IPs are expensive.
An IVA is legally binding.
If you lie on an IVA application it is a criminal offence.

If you wish to discuss the pros and cons of an IVA procedure and understand how it can help you please give us a call on freephone 0800 680 0759.

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