Making the decision to enter into an IVA shouldn’t be taken lightly and there are certainly lots of considerations to be borne in mind before you decide to commit to one.
If you’re struggling with debt than an IVA might be a good solution for you if the following situations apply:
- You have at least two separate debts (although these can be with the same creditor – for example, a bank overdraft and bank loan owed to the same lender)
- You have debts in excess of £10,000.00
- You have enough residual income to make a monthly repayment
- You have a regular income (not benefits)
If you decide to enter into an IVA then it becomes legally binding between you and your creditors. One of the main advantages of entering into an IVA is that once it’s in place your creditors will no longer be able to contact you. This means that any phone calls, correspondence and even home visits will cease with immediate effect. Many find this to be a huge relief in itself since being in debt can certainly lead to health issues such as depression, stress and even suicide.
Other advantages of an IVA include the fact that the arrangement is time limited (usually for 4 or 5 years) and at the end of it any remaining debt will simply be written off. Even at this stage creditors are still unable to pursue any remaining balance so once you’ve reached the end you can start to rebuild your financial future more positively. There are some IVA companies to avoid, so be careful when you pick your chosen firm.
Of course, that said IVA’s aren’t suitable for everyone. An IVA might not be the best option if:
- You work in certain professions (such as the police force, armed services or prison service). Some of these job types are very specific about the consequences of entering into an IVA so always be sure to check your contract of employment for restrictive covenants.
- Your employment or personal circumstances are likely to change within the next 4/5 years. Remember, an IVA is legally binding which means you’ll have to commit to the duration of it. If you might face redundancy or are looking to retire then you’ll be advised to consider other debt management options.
- Your debts don’t exceed £10,000.00 in total
- You don’t currently have any spare income to make monthly repayments
- You receive support for mortgage interest (sometimes referred to as “SMI”). If you enter into an IVA then your SMI payments may stop and you might be required to repay any SMI you’ve received since 6th April 2018.
As can be seen then, there are certainly lots of considerations to be taken into account when deciding whether an IVA might be the best way forward for you. For this reason it’s crucial to shop around and get the best advice from someone you feel comfortable working with. You can also get advice online, through debt management charities such as Get out of Debt Free or your local Citizen’s Advice Bureau.