Type ‘IVA’ into internet search engines and you’re greeted with sponsored adverts making bold claims like ‘Write off 80 per cent of your debt from as little as £75 a month’ etc. This is just an example found with a quick a search online – it appears the Individual Voluntary Arrangement is being billed as the latest life hack to solve your money woes.
Many people are accusing these agencies and consultancies of false advertising. The most obvious reason for that is IVAs are not a one size fits all solution for everybody, and it’s certainly not a life hack – it has risks. It is better to jump in after testing the waters, as the metaphor goes. So we have compiled the biggest risks associate with IVA to help you in decision making.
- Savings and personal pension payments will usually be used to pay your creditors in an IVA. It may affect your job and you might have to remortgage your home if you own one.
- If your circumstances change, you could struggle to keep your IVA payments. This means that the arrangement could fail and you could be made bankrupt.
- It also impacts your credit score. Citizens Advice says that people with an IVA might find it difficult getting credit in the short term, while getting more than £500 of credit requires you to get written permission from your insolvency practitioner, unless the credit is for public utilities.
- Longer-term, it’s likely to have an impact even once the IVA has finished. Details of IVAs are kept in a public register called the Individual Insolvency Register. Your IVA will stay on that register for the length of the IVA, and removed three months after the IVA has ended.
- Details of the IVA will also be kept on your credit reference file by credit reference agencies, and it will stay on your credit file for six years from the start of the IVA. This means creditors can see you’ve used an IVA when they check your credit rating before agreeing to lend you anything.
Much of this is not revealed in the advertising. But you need to be aware of these aspects before you enter into a formal agreement. We hope this list helped you. Happy Financing!