Would an IVA be suitable for me?

IVAs (Individual Voluntary Arrangements) are a formal, legally binding debt solution – a form of insolvency. They are seen by many as a preferable alternative to bankruptcy (this is partly because an IVA is very unlikely to force the sale of your home, while bankruptcy is almost certain to).

If you can’t afford to repay your unsecured debts within a realistic amount of time, but can commit to making regular reduced monthly payments, then an IVA may be the right debt solution for you.

If you enter an IVA, you will usually make payments for 5 years. When the IVA comes to a successful conclusion, any remaining unsecured debt will be written off.

Please note, however, that an IVA can’t go ahead unless enough of the lenders who would be involved agree to the terms which you and your IP (Insolvency Practitioner) propose.

The differences
IVAs and bankruptcies are very different; the differences listed below are often seen as the most important ones:

An IVA usually lasts for 5 years. Bankruptcy usually lasts for 1 year – but payments may continue for a total of 3 years, and in rare cases, a ‘Bankruptcy Restriction Order’ may be arranged, which can last for 15 years.

An IVA may require you to release some of the equity you have in your home; it is highly unlikely to force the sale of your home. On the other hand, bankruptcy is highly likely to force the sale of your home.

IVAs won’t be published, although they will be shown in the ‘Individual Insolvency Register’ (which is available to the public). In contrast, bankruptcies will be published in newspapers.

If you enter an IVA, certain companies may not hire you. If you have been declared bankrupt, you won’t be allowed to work as a local government councillor, for example, or a company director.

The similarities
IVAs and bankruptcies do, however, have their similarities:

They are both forms of insolvency.

They will both stay on your credit report for 6 years, which could make further credit harder and/or more expensive to obtain during that time.

They both allow you to write off the portion of your debt that you can’t afford to repay.

They both restrict the amount of money you are allowed to borrow while they are in progress.

They can’t write off certain types of debt – for example, secured debts or court fines.

To find out if an IVA would be suitable for you, you should contact a professional debt adviser.