Is an IVA Worth It? 

 April 1, 2022

By  Darren

When you’re struggling with any level of debt, it can feel impossible to get yourself out of it. All types of debt can easily become overwhelming, and, with negative impacts on credit scores, you might be wondering where to turn. 

One of the more popular options when it comes to debt solutions for people in this situation is an Individual Voluntary Arrangement (IVA). If you’re considering an IVA, but don’t know enough about them to work out if it’s the best option for you, keep reading as we answer the all important question: is an IVA worth it?

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What is an IVA?

In short, an IVA is a binding agreement between yourself and your creditors and is arranged by an insolvency practitioner. Provided it is approved by your creditors, you will be required to make monthly payments over a pre-arranged period of time to your insolvency practitioner, who will distribute the money between your creditors and take a share for themselves to pay their fees. 

Your insolvency practitioner will work with you to determine an affordable payment to make over the payment period. In order to calculate these regular payments, your insolvency practitioner will need information about your monthly household income and expenditure, to work out your disposable income. The disposable income is basically the money you have left after you pay all of your household bills and expenses. Sometimes you may have an unexpected bill, or your circumstances change. There is the possibility of taking a payment break during your IVA - however, this has to be approved or it would be considered a breach of your arrangement and could be considered a failure of your individual voluntary arrangement. 

If you have creditors making a demand for payment that you are unable to make, if you’re in arrears or in any form of insolvency, you might want to consider getting in contact with a debt management company or insolvency professional such as the team here at NDH Financial. 

How Do I Know If an IVA is a Good Idea?

If you need some help deciding if an individual voluntary arrangement is right for you, consider getting in touch with NDH Financial for a free IVA consultation. We offer a simple conversation to see if an IVA is right for you based on your circumstances and the legal requirements of the IVA.

An IVA involves a strict payment schedule and is in no way an informal agreement. This agreement has to be approved by a majority of your creditors and is very much dependent upon your debt levels and amounts of credit. Typically, if your debts are less than £6,000, it’s unlikely that an IVA will be good for you. Alongside this, if the payments you can afford to pay to your insolvency practitioner are high, there may be better options available to you if your debts are lower than this threshold, as you will be able to repay your debts within 60 months. 

Another factor that plays into whether or not you need an IVA is if you owe money to more people than just one. If you have two or more creditors, it’s likely that an IVA is an option worth considering. If you just have one debt, then you can avoid the fees of the IVA by agreeing an affordable payment directly with your creditor. Potentially, if you have debts that cannot be included in an IVA, such as child support arrears, the IVA may help you reduce the payments to your other creditors, whilst you make the necessary payment to the creditor that cannot be included. It’s also likely that your credit rating will be poor and therefore your chances of getting further credit will be low and any application for credit will likely be declined as a result. If you cannot pay your creditors the agreed amount, this then leaves you in danger of bailiff or court action. 

However, an IVA will offer you protection from bailiffs and any action from creditors or the courts. So, if you don’t want to have to deal directly with your creditors, an IVA will prevent any actions from them as soon as your IVA has been approved. 

Will an IVA Impact My Future?

An IVA will have an impact on your future - but so will having any level of debt. So, if you’re worried about your credit report, an IVA is still the better option. Having something like electric arrears, council tax arrears, or unsecured debt on your credit file will make it difficult to apply for credit cards or ask for loans from people. While an IVA isn’t necessarily viewed as a ‘good’ thing to have, it certainly shows that you’ve taken action to help yourself in a difficult time, which isn’t to be taken lightly. 

The main impact that an IVA will have on your future is on your credit rating and any subsequent wishes to take out a loan or apply for a mortgage, for example. The details of your IVA will be kept on a public register known as the Individual Insolvency Register for the entire length of your IVA. This information will then be removed approximately three months after your IVA term has ended. The details of your IVA will also be displayed on your credit reference file, which is available to view by any company or individual who you have asked to borrow from. 

When you make an application for credit, the lender will check your credit details to see how likely you are to be able to pay the money back. If they see that you’ve had difficulties with debt in the past, the lender may view you as being high risk  and may refuse to offer you any credit, or charge you a much higher rate of interest. These details will remain on your credit file for 6 years from the start of your IVA and will then be removed, so it’s important to be sure an IVA is right for you before committing. 

However, it is still possible to get credit during or after your IVA, especially if the credit is for personal and household goods. If you wish to obtain more than £500 worth of credit for anything that is not considered to be public utilities, you’ll have to ask your insolvency practitioner to give you written permission. Just remember that the interest rates are likely to be higher than they would ordinarily be. 

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Speak with Our Team of Debt Consultants.

Do you have questions or would you like more advice?

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Enquire Now for Debt Solutions

If you’ve read this guide and decided that an IVA is for you, or if you want to find out more about what an IVA means for you personally, NDH Financial is a fully licensed insolvency practitioner that specialises in assisting individuals with personal insolvency issues. We offer an impartial review of your circumstances and identify appropriate solutions through our free IVA consultations, always treating each individual with dignity and respect at all times. So, what are you waiting for? Get in touch with NDH Financial today.

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