If you’re looking to kick your finances into touch then there are a lot of considerations to be borne in mind and they shouldn’t be taken lightly.
In this article we look at 5 of the key things to consider about entering into an IVA.
Your personal circumstances
Whilst there can be little doubt that IVA’s have helped many people to get an unmanageable debt situation firmly under control, much depends on your personal circumstances, for example:
- You have the ‘right’ type of debts – i.e. they’re ‘unsecured debts’ and not ‘secured’ (for example, mortgage arrears, child maintenance arrears or Court fines)
- You have enough surplus income to put a proposal plan forward to your creditors (if you don’t, then bankruptcy might be the only way forward to get out of debt)
- You have at least two separate debts which add up to more than £10,000
- You have at least two separate creditors
Since no two cases are ever the same, it’s important to discuss your personal circumstances with your chosen advisor to ensure that an IVA is right for you. They don’t work for everyone.
Once you’ve consulted with your chosen advisor, he or she will carefully consider all your income and outgoings before recommending a certain amount to repay each month to your creditors. This amount will reflect a reasonable proposal but at the same time should leave you with enough to live on each month. However, remember that an IVA is legally binding and once your payment plan is accepted by your creditors it becomes legally binding. It’s therefore imperative that you’re completely transparent with your advisor and are confident that you’ll be able to maintain the set monthly repayments for the duration of the IVA.
Potential changes to your circumstances
Once your proposal has been submitted to your creditors for consideration, you should remain mindful that they may require certain changes to it. Of course, your chosen advisor will discuss these with you (in the event that they’re put forward) and will best advise you on whether you should agree or not.
Failure to make repayments
If you over-commit yourself in terms of monthly repayments then there may well be a risk of you defaulting. If this happens then your IVA companies could potentially fail and you may have to consider bankruptcy as an alternative.
Once you’ve entered into an IVA then you won’t be able to obtain any further credit for the duration of your IVA. This is an important consideration if you feel you might need credit for whatever reason, since an IVA usually lasts for around 4 years. The IVA will also show on your credit record for a period of 6 years and the Insolvency Register, which is free to view online. However, once the 6 years has lapsed then there’s no reason why you shouldn’t be able to obtain credit in the future.