An IVA is more than just a Debt Consolidation solution; not only are payments reduced and replaced with a single payment – a proportion of the debt can also be written off.
For those who qualify, an IVA may seem too good to be true - here we compare and contrast the main pros and cons between an IVA and other debt consolidation options.
IVA advantages over Debt Management
- A portion of the debt can be written off with an IVA.
On a Debt Management Plan, the entire debt is repaid. - An IVA normally lasts no more than 5 years.
A Debt Management Plan lasts for as long it takes to clear the debt.
Debt Management advantages over an IVA
- A Debt Consolidation Plan can be for debts as low a £1,500
£12,000 the normal minimum unsecured debt for an IVA - Minimum payments for a Debt Consolidation Plan are £80 per month.
£150 per month is the normal minimum for an IVA. - An IVA is a legally binding agreement, the terms of which are not so flexible should your financial situation take a down turn.
A Debt Management Plan is an informal arrangement This mean, if your circumstances change, it is easier to renegotiate payments. If you considering a Debt Management Plan may be the most appropriate debt consolidation solution for you, call us for advice and support.
IVA Advantages Over Bankruptcy
- Loan and credit-card companies agree to write off a proportion of the debt.
The amount of debt written off depends up personal circumstances and subject to the successful completion of the IVA, which normally means maintaining agreed repayments for 60 months. - An IVA is a private matter and is not publicaly advertised.
Your name and address will appear on the Government’s Individual Insolvency Register, but not potentially in your local newspaper. - You will not be subject to employment restrictions or lose your job.
Unless there is a specific clause relating to IVAs in your employment contract. - You get to keep your home.
In bankruptcy, you will lose your home if proceeds from it’s sale can go towards paying your debts. With an IVA, may have to re-mortgage to release equity in it’s final year. - All reasonable assets can be retained.
- You may continue to operate your own business
In bankruptcy, your business will be closed down or possibley sold. - No potential of judicial investigation into your finances.
In bankruptcy, the Official Receiver will investigate your financial affairs and report any irregularities to the courts. This could result in criminal proceedings. - Under certain circumstances an IVA can result in an existing bankruptcy being annulled. This is called a Fast Track IVA.
IVA Disadvantages compared to Bankruptcy
- You pay back more of your debt.
The whole point of an IVA is to allow creditors to get back more of their money than they would via bankruptcy. In bankruptcy, you’re normally required to make payments from income for 36 months. In an IVA, you agree to repay what you can afford each month for five years. - You could still become bankrupt.
If you fail to maintain the agreed IVA payments, your creditors may start bankruptcy proceedings . This may leave you in a worse financial situation than if you had not entered an IVA.