Debt Management Plan - Pros and Cons of IVA

There is a vast variety of content about IVA (Individual Voluntary Arrangement) on the web and at a few places, we may also come across the vague content or we may call that the half-truth. IVA is basically a legal agreement between creditors and debtors which provides the debtor with the facility to pay the loan at trouble-free rates without stressing himself. IVA calculator is used normally to assess this whole process.

Pros:

Now to assess if anything is really in our benefit, we must look at its pros and cons. Let’s first look into the benefits of an IVA.

1. Fixed Time Frame:

IVA will always have a fixed time frame which normally is 5 to 6 years and after this time frame is over, the debtor will be debt free and the creditors won’t have to chase him ever. In case the debtor has equity in his property which he cannot release for the benefit of creditors then this time span gets extended for 12 months.

1. Protected Assets:

With the approval of IVA, not only the debtors but creditors are pledged too not to take any legal action, which means that any asset debtor owns is now protected. Assets like house and car are taken into account when setting up the IVA but the debtor can never be asked to sell them, but to release equity from their asset when the agreement is about to end.

1. Debt Written Off:

After the debtor makes 60 monthly payments, the remaining balances will be completely written off even though a debtor may not have paid all of the debt. After paying these, the debtor won’t owe anything to anyone. But, one must have the minimum prescribed debt to pay off for entering into an IVA or otherwise he can pick one from other debt management plans.

1. Affordable:

While compiling an IVA, the debtor’s affordability is always kept in mind rather than burdening him with a fixed payment for the particular amount he owes. That’s why a debtor is bound to inform if his income increases, so his debt repayments can be adjusted accordingly.

Cons:

Now when we’ve looked at a few of the plus points of an IVA, we must look at the negatives of it to have a clearer view to instituting whether an IVA is apt for you or not. So, let’s have a look at the downsides.

1. Affected Credit Rating

An IVA remains on debtor’s credit file for 12 months after it ends. It means if debtor has paid the amount in 5 years then it will remain on his credit file for an extra of 12 months which will make it six years. So this way, it may affect debtor’s credit score.
Since the main focus of a debtor is to be debt free at the first place, so this drawback never bothers them anyway.

1. The Credit Clause

In an IVA, if the debtor owns some equity in his property or any other asset then he will be asked to release it 6 months prior to the end of the agreement. If the debtor is unable to do it, then his case may be extended for another 12 months.

But it doesn’t apply to all of the property. This only applies to the property which was bought via either outright or mortgage and the debtor will only be asked to do it if his credit rating allows it.