IVA Disadvantages
There are some disadvantages of reducing your debt through an Individual Voluntary Arrangement (IVA). These include:
- The debtor must have significant unsecured debt to qualify for an IVA.
- You must have a suitable income or be in full time employment in order to be able to make the regular payments required for the IVA.
- You are not protected from bankruptcy if you fail to keep to the terms of the IVA, and in particular if you miss payments.
- If the IVA fails and you fall into bankruptcy the costs of the IVA will be added to your overall debt.
- To gain approval, creditors representing more than 75% of your debt must vote in favour of the IVA proposals.
- All IVAs are recorded in a public register and could affect your credit rating and chances of borrowing money in the future.
- If you enter into an IVA and get a sudden windfall e.g. a win on the lottery, you will be required to pay the money owed to your creditors.
- If you work overtime and earn extra income you may have to divide up the money 50:50 between you and your creditors. There will usually be clauses about this in the Individual Voluntary Agreement.
- You are required not to obtain further credit during the 5 years under the terms of the IVA.