IVA - An Alternative To Bankruptcy

An IVA (individual voluntary arrangement) can be a more viable alternative to declaring bankruptcy. It is one of the options that are available when you are faced with debts that have spiralled out of control and where taking a consolidation loan is not an option. If you are faced with such debts then you might be considering bankruptcy however this can have long lasting effects where an Individual voluntary arrangement doesn’t. However this is not to say that an individual voluntary arrangement is an easy way out and you would have to weigh up the pros and cons. None of the solutions to breaking free of debt is easy but they are worth pursuing and sticking with once you have found the correct solution for your needs.

• You are able to avoid the stigma that is generally associated with bankruptcy
  
• If you own your own business then you would be able to continue trading which of course mean you continue bringing in an income
  
• You along with your insolvency practitioner have a choice over the assets that are available to your creditors
  
• The costs for administration are not as expensive as bankruptcy therefore you have more money to offer your creditors
  
• You only need 75% of your creditors to agree to your IVA
  
• Creditors will usually realise that getting at least some of the money you owe back is better than nothing
  
• There are less restrictions than when declaring bankruptcy

• Really only suitable if you have over £15,000 in debt that are unsecured
  
• An individual voluntary arrangement normally lasts around 5 years with high payments
  
• Your home could be at risk if the creditors want to take the equity into account
  
• If you fail to keep up with the agreement you can be made bankrupt and still have to pay the IVA costs
  
• You would be closely supervised by your insolvency practitioner

The above pros and cons do have to be weighed up when considering an individual voluntary arrangement and getting the help and advice of a debt management company should be considered essential. They will be able to answer any IVA questions you have along with talking over other alternatives you might choose to take.

One of the biggest considerations you would have to consider is the amount of money it would cost you to set up an Individual voluntary arrangement. These can be substantial in the region of £2,500 with additional expenses, VAT and administration fees added on top. There will also be costs for the insolvency practitioner involved which could be in the region of around £750. If you are already in debt and struggling financially the costs could be out of your reach.

Being in debt will have an effect on your credit file regardless of whatever solution you take to try and get out of debt. An individual voluntary arrangement will also affect your credit file and will usually remain on file for up to 6 years after the arrangement has ended. While you are in the IVA agreement your chances of obtaining any type of credit will be virtually nonexistent. Once the arrangement had reached its term you could still have problems obtaining credit of any kind and you could expect to pay a higher rate of interest if a lender should take a risk on you.

You would also have to consider the fact that any assets you have could be at risk. These could be your savings, your home and any investments you have. This would depend largely on your creditors and some are more flexible than others.