In part seven Nick Lord looked at how individual voluntary arrangements (IVAs)
work. Now in part eight he examines the advantages and disadvantages of this
type of debt solution.
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Individual Voluntary Arrangements (IVAs) can be a good way of dealing with debt
problems. But, they also carry risk. Here is a summary of their pros and cons:
Advantages of IVAs:
-
Allow you to repay your debt at an affordable rate over a reduced period of
time. Alternatively, the IVA
may be proposed on the basis that your family or
friends are prepared to help meet your debts;
-
Offers the advantages of bankruptcy but without some of the restrictions and
disadvantages.
Disadvantages of IVAs:
-
The costs of setting up an IVA can be surprisingly (some would say
outrageously) high;
-
You may have to pay an upfront fee;
-
Defaulting on the payment arrangement can lead to bankruptcy;
-
The regulation of Insolvency Practitioners is fragmented and many consumer
groups report situations where Insolvency Practitioners seem more interested in
the fees that they earn rather than the success of the IVA;
-
Your credit reference file will contain details of your payment default.
IVAs can be a good option if:
-
You face a large debt problem and a debt management plan will involve payments
over a greatly extended period;
-
You are faced with bankruptcy but wish to avoid the associated restrictions and
disadvantages;
-
You identify an Insolvency Practitioner who you can trust to propose a
realistic, workable, and, if appropriate, sustainable arrangement which works
to the benefit of both you and the companies to whom you owe money.
IVAs can be unhelpful if:
-
You don't shop around to find an Insolvency Practitioner who understands your
problems and who you feel you can trust.
IVAs can be disastrous if:
-
You agree to make regular payments that you know you won't be able to sustain.
