An IVA stands for an individual voluntary agreement that freezes your debt so that you can pay back within a given period of time. It is used by businesses as it protects them from legal action. A legal action includes being declared as bankrupt or when the court takes action for default on payments.
IVA pros & cons–
The IVA pros & cons are as follows-
- You only have to pay what you can afford. Your practitioner advises you with the amount of money that you can comfortably other than your expenses.
- By committing to an IVA, you can protect your assets such as home or vehicle. They are not auctioned by the creditors and they can no longer force you to sell them to repay your debts.
- After you have agreed to an IVA, the creditors can no longer enquire about the payment. You will have to deal with the consultant and they will make sure that you can timely update your payment.
- The creditors cannot make additional charges or add more interest to your loan. The amount is fixed. The debt amount does not increase with changes in interest rates and charges.
- It is a complete legal agreement so the creditors and advisers are bound to follow the agreed terms.
- You can take your time to repay as much of a debt as possible at an affordable rate. There is no threat of being prosecuted or penalized by any of the creditors. You can now deal with your debts in a responsible manner.
Cons of an IVA
- IVA negatively impacts credit rating. Once it has ended it will stay on the credit file for another for the year. It makes it hard for you to obtain future loans and other financial products.
- IVA is not private. It is searchable by anyone. When it comes into effect the agreement is listed on the public database. Although it is in use, few people actually use this system.
- It is important to make payments to the IVA. It is somewhat flexible but you need to follow a budget for the next few years to make sure you continue with the repayment that you have discussed with the advisor.
- It also restricts you to have a bank account with an overdraft credit card, checkbook free. You need to have a basic bank account with no credit.
Why is it suitable?
An IVA can be suitable for you if you owe money to more than one creditor. You need to check out the IVA pros & cons in order to understand. Anyone with serious debt problems can apply for it and it is particularly helpful for people who own assets. It gives an opportunity to try and protect the objects which would be valuable in terms of bankruptcy. It gives you a chance to repay more to your creditors to a good structure by your advisor. It makes you protect their assets and also maintain peace since it is a mutual agreement you can keep more control over your financial affairs.