Advantage & Disadvantages Of The Government IVA

There is a lot of public talk at the moment about the government supported debt solution known as the “individual voluntary arrangement”.

As a quick overview, the individual voluntary arrangement (otherwise termed “IVA) is a debt help scheme backed by 1986 insolvency legislation known as the 1986 insolvency act which creates a legal provision for people looking for a powerful (government backed) solution to eliminate debt. More on government backed IVA’s here.

When it comes to the IVA as an option to relieve people in debt from their financial liabilities, the pros outweigh the cons significantly, so let's start with the cons’ and then move into the more positive advantages of the IVA.

IVA Cons (Disadvantages)

The IVA requires a significant level of personal commitment, the financial decisions which may or may not have influenced the position you are in (sometimes it can be circumstances outside of your control such as the loss of employment or business issues) will need to change for the better, the contributions to monthly repayments must take a priority over other expenses, regardless of the factors leading up to the accumulation of debt.

The IVA must also be approved by the courts AND the companies you owe money to.

If the agreement is broken it can result in bankruptcy.

Now onto the advantages of the IVA the “Pros” of such an arrangement

All interest and charges of unsecured debt are frozen, meaning the debt will not grow or get any worse whilst being repaid.

Your creditors cannot bother you during the IVA and in actual fact they have to go through the insolvency practitioner (IP) in order to communicate about anything in relation to the debts (whilst the arrangement remains intact).

The IVA can be set up quickly, so you can see the benefits quickly.

It protects your assets from repossession, enabling you to deal with your unsecured debts whilst not worrying about meeting the demands of any rental fees, mortgages or any other type of debt that isn’t traditionally included in an IVA.

The IVA is designed to maximise repayment of unsecured debts and to help avoid bankruptcy which suits everyone's’ interests, so the chances of the IVA being approved if the alternative is bankruptcy should in principle be relatively high, and not all creditors have to agree to such an arrangement (only 75%) however if the alternative is the debt being discharged through bankruptcy (which effectively leaves the debt not being paid at all, not even fractionally) then the creditors are likely to agree to the IVA.

Once the IVA is completed, the rest of the debt is written off (often around 85%) over the years literally millions of pounds in debt have been written off with these arrangements which have helped the public significantly over the years.

So there is a wide range of possible benefits of an IVA for a complete reference on the benefits of IVAs check this page for in depth information.

What Is The Criteria To Qualify For The IVA?

To qualify for an IVA you must have at least £5,000 in debt and at least two creditors, if there is less debt than that or fewer creditors the IVA would not be considered justified.

Many would be surprised at the benefits and the power of the IVA as a solution to debt, however, it does require thought and consideration about the disciplines involved in maintaining participation in such a scheme.

To find out more about this arrangement there are a range of internet websites to offer this service and a range of other alternative debt solutions such as debt management plans and other debt relief solutions.