Disadvantages of an IVA

An IVA, or individual voluntary arrangement, is a legally binding debt solution. This solution is entirely based on an agreement between your creditors and you. An IVA should be seriously considered if you find yourself unable to repay your debts as they fall due. Providing your circumstances meet the requirements of an IVA, it may be the best solution for you. An IVA will typically reduce the total amount you have to repay and additionally, it lasts for a fixed period of time so you can look forward to a debt free future. An IVA offers several benefits in contrast to the bankruptcy proceedings. Nevertheless, there are also several disadvantages of an IVA. Some of the disadvantages of an IVA are:

• An individual involuntary arrangement (IVA) is a legally binding agreement-
  Since the individual voluntary agreement (IVA) is an official agreement, the debtor would be restricted by its terms and conditions. If the debtor is either unable, or unwilling, to comply, the IVA may be failed. Depending on the circumstances of the failure, the creditors may subsequently petition for bankruptcy.
• The individual voluntary arrangement (IVA) has annual reviews-
  Debtors in an IVA will have to submit a financial statement, payslips and P60 every year for review. This is a condition of the IVA and can lead to failure if the debtor does not comply. If the debtor’s financial situation is shown to have improved, they may be required to increase their contributions based on the increase in disposable income.
• The individual voluntary arrangement (IVA) has inflexible payment terms-
  An individual voluntary arrangement (IVA) is quite inflexible in what it expects the defaulters to contribute during their individual voluntary agreement. In exceptional circumstances payment breaks may be granted, although these will often need approval of the creditors. As a general rule, this flexibility should not be relied upon and the debtor should endeavour to make his payments on time.
• No credit during an individual voluntary arrangement (IVA)-
  Once the IVA Company starts the individual voluntary arrangement (IVA) the debtor is not permitted to obtain any credit without the approval of their Supervisor. If the debtor does acquire unapproved credit, it is considered a severe breach of the individual voluntary arrangement (IVA) and the individual voluntary arrangement can be failed through the insolvency practitioner.
• Your credit rating: The individual voluntary arrangement (IVA) would be noted on the file of credit of the defaulter and will remain there for six years from the start of the IVA. Only when the individual voluntary arrangement (IVA) is finished can the debtor begin restoring their credit rating.
• Last but not the least; if the defaulter has taken an individual voluntary arrangement and subsequently achieves a sudden windfall, such as a win on lottery, the will be expected to enter a portion, if not all, of these funds into the IVA to the benefit of their creditors.