Risks and Disadvantages of an IVA

When your debts are beyond your control and you seek help in the form of an individual voluntary arrangement (IVA), you should be aware of the advantages of this sort of arrangement as well as the potential risks involved.

Although an IVA is not a declaration of bankruptcy, it can still result in your being declared bankrupt if you fail to keep your obligation and default on your payments to the insolvency practitioner.

Because the credit companies receive monthly updates of all IVAs, an IVA will negatively impact your credit rating for six years from the time it commenced.

Contributions to some types of pension plans may be frozen for the duration of an IVA, although employee pension plans that are provided by employers are not generally affected in this way.

Some people worry that their employers will learn of their financial problems and view them as irresponsible or untrustworthy. In most cases, your employers will not be notified that you have entered into an IVA. However, if your employers happen to be included in your list of creditors, then the terms of the IVA require that they be notified.

Many people choose an IVA over a bankruptcy to avoid losing their home. Although an IVA will usually make provisions for you to continue to pay your mortgage so that you can keep your home, you may in some cases be required to re-mortgage the home after three years.

An IVA also differs from a bankruptcy in that it does not have to be advertised the way that a bankruptcy order does, so your privacy will be protected. An IVA is somewhat less invasive and less devastating than a bankruptcy, so for people who have something to lose, it may be the best option.