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What does it cost entering an IVA?

An individual voluntary arrangement, or IVA, is a procedure not to be undertaken lightly, as it can lead to significant consequences further down the line. To understand these costs, we need to first look at the procedure. The IVA was introduced as an alternative to bankruptcy for individuals. Those individuals with assets and resources to pay back creditors are suited to an IVA, allowing breathing space from creditors. Debts that can be dealt with through an IVA procedure include personal loans, credit cards and other unsecured loans. Business Rescue Experts, leading UK insolvency practitioners, are sharing the details of an IVA from start to finish.

As a formal insolvency procedure, a licensed insolvency practitioner (IP) will oversee the process. Initially, the IP will advise you on the best interests for your situation, and whether an IVA will at all be suitable. They will then help with the IVA proposal. Their second role is that of the nominee, producing their report for your creditors. This report will detail the investigations into the situation and findings, as well as their recommendation on the proposal. Lastly, their role is that of supervisor. If the IVA is accepted, they will supervise the repayments you make towards creditors. Essentially, they will work for the benefit of both you and your creditors.

Duration of an IVA

The duration of an IVA varies significantly with each case. However, in most cases, they last between an average of five and seven years. The repayments may be completed quicker if individuals can offer creditors a lump sum. When producing your proposal, you will suggest the realist monthly repayments you can make. Typically, creditors will not accept an IVA for less than £80 per month. The larger the repayments, the less it will last. It’s also important to note that you may be required to remortgage your property as part of the IVA. For those individuals that cannot do so, it could extend the procedure by up to 12 months.

As part of the procedure, you will be placed on the IVA register. This register, for England and Wales, features your name, address, D.O.B and occupation, and is open to the public. Throughout the length of your IVA, you will be featured on the register and for three months after all payments have completed.

It’s important to consider the consequences of being placed on such a register. Future employees can search for your name, and it could affect job prospects – particularly for those within the financial sector.

There are also costs involved in entering an IVA. For instance, you will have to pay the insolvency practitioners fees. While some may take their fees out of the monthly repayments for creditors, others may ask for their fees before taking on the case. It’s worth noting which companies do so and whether you have the resources to afford their services.

What are the benefits and disadvantages to an IVA?

As with all insolvency procedures, there are advantages and disadvantages to consider. Entering a formal process is costly and could offer long-term consequences, so you must always seek advice at the earliest possible opportunity.

Benefits

  • The IVA will last only for a certain period of time – 5-7 years on average
  • Legal action from creditors is suspended
  • Creditors cannot ask for additional payments and interests
  • It’s possible to improve credit rating after an IVA
  • An IVA is a legally-binding contract, so you will always know what payments are due each month
  • Your employee status may not be affected with an IVA, whereas bankruptcy can cause a severe impact on your job status

Disadvantages

  • During the IA, your credit rating will be negatively affected
  • While it is possible, it may take some time to improve your credit rating – affecting the ability to borrow etc.
  • Name and other personal information will be placed on the IVA register
  • The procedure can prove costly, including IP fees

What are the consequences of an IVA?

As mentioned above, the consequences of an IVA can prove costly for individuals. Therefore, you must consider all options and seek professional advice to opt for the best possible solution for your situation. When you do enter an individual voluntary arrangement, credit agencies will be informed of your finances. A note will be placed against your name, which will last throughout the entire process. This note will affect your ability to gain credit. Similarly, it may also impact on those attempting to obtain a mortgage after the procedure.

There are lenders who specialise in helping those with poor credit, so it’s worth looking into their services. Ultimately, if you are facing a financial crisis, advice at the earliest stage offers the greatest chance for recovery.