IVA Pros

Affordable payments

Your monthly IVA contribution will be calculated according to your affordability, based on the amount of money left over from your income after you’ve paid living costs. For example, if you earn £2,000 per month and your living costs are £1,850 then your IVA payment will be £150. 

Debt write-off

One of the most appealing parts of IVAs is that your debts are written off. IVAs are a fixed-term agreement that last five to six years, so as long as you stick to your monthly payments, any debt that hasn’t been repaid during that period will be written off.

No phone calls from creditors

When you have an IVA, your creditors aren’t allowed to contact you directly to chase what you owe them. Instead, all communication is done through your Insolvency Practitioner (IP), making the repayment process less stressful. 

Clear end date

From when your IVA begins, you will know when it’s going to end, providing you continue to pay your monthly instalments. This means that once your creditors have agreed to the terms of the IVA, they can’t ask for a longer repayment period.

As an IVA is a legally binding agreement, you are fully protected if your creditors breach the terms of the contract. They are not allowed to take legal action to recover unsecured debt that is part of the IVA.

No interest or charges

When you enter into an IVA, any interest or charges are frozen so can no longer increase while you’re making repayments, meaning your unsecured debt will stop growing. It also prevents creditors from charging fines for late payments or falling into arrears. 

To discover more about how to manage your debt and to receive free debt advice, you can visit www.moneyhelper.org.uk or read about options for paying off your debt.

IVA Cons

Effect on credit rating

If you’re in an IVA, it will be noted on your credit report for the duration of your plan. This means that potential lenders will be able to see this if they do a credit check on you. You also won’t be able to apply for more than £500 credit without written approval from your IP first.

Insolvency Register

Your IVA will appear on the Insolvency Register, which is a database available to the public, for the duration of your plan. It will stay on the register for three months after completion or termination of your IVA. 

Windfall clause

Having an IVA will require you to tell your IP if you receive a windfall, such as a bonus at work or inheritance. You may then be asked to contribute a partial sum towards your IVA. Depending on the size of your windfall, you might have to repay the original debt in full.

No secured debt

IVAs only cover unsecured debt, which is debt not secured against an asset, e.g. your house. This means any secured debt, such as mortgage arrears or child maintenance, have to be paid separately to an IVA.

Potential impact on your job

In most cases, getting an IVA will not affect your job. However, if you work in certain sectors, such as law and financial services, it is worth checking. You may not be able to work in that profession while in an IVA or you may have to follow certain conditions.

Basic bank account

For the duration of your IVA, you will have restricted banking facilities. This means you can only have a basic bank account, which doesn’t include access to overdraft, credit card or cheque book facilities. 

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