Advantages of an IVA

Advantages of an IVA

An IVA is an Individual Voluntary Agreement, which is one of the only alternatives to bankruptcy and, depending on your situation, could be a preferable solution. Ultimately, an IVA allows the borrower to spread the debt which needs to be paid, over the period of five years. This can often allow a business to keep running so that it can grow to bring itself out of debt, but it is possible that it just prolongs the inevitable. Following the Insolvency Act of 1986, an IVA became something supported by the government in a bid to keep as many sole-traders afloat as possible, whilst wishing to reduce the amount of consumer bankruptcy.

There is a great social stigma attached to going bankrupt, but this is nothing compared to other problems that you could face once it actually happens. You can’t, for example, join the armed forces or work in positions of the state, whereas if you hold an IVA you can hold any position you want. You can keep your job, or continue running your business, with an IVA, but this is nearly always impossible if you are forced to declare bankruptcy. Most IVA’s won’t even specify that your employer need know you are having such difficulties, and in generally you can keep an IVA much more low key than bankruptcy. The newspapers won’t catch wind of your IVA, and your friends won’t have a clue, so it can often be much less stressful than bankruptcy.

If you’re lucky, or you weren’t too reckless with your debt, five years will seem like a long time to pay it back, so if you have confidence that you can pay your debts back given time, then an IVA is almost always preferable to bankruptcy. It is important to remember that bankruptcy is very “final”, that is to say that once it has happened, there really is no going back. You could lose friends, family, and everything around you if you go bankrupt, whereas five years of heavy budgeting and financial constraint under an IVA will seem like nothing in the bigger picture of your lifetime.

It is actually surprisingly costly for bankruptcy to take place (Ironic in many ways), so it is often preferable for the banks to accept an IVA instead of going through the legal procedures of bankruptcy. The IVA is very easy to agree once your bank has accepted your situation, and doesn’t involve anything like the legal processes that plague bankruptcy proceedings.
If you successfully complete an IVA, your credit rating won’t be completely shattered, as it would be if you had gone bankrupt. Once you’ve come out the other side, there is a world of opportunities available to you and you’ll probably have learnt some harsh lessons without losing too much of your life.

By entering into an IVA, you are no longer being forced to do anything in particular; you are simply required to pay back the debt in instalments. Bankruptcy may require you to sell your house or other assets, whereas an IVA leaves you to decide the best way to pay back the debt you are in.

As with many things, it is better to prevent yourself from ever getting into the situation where you need to choose between an IVA or bankruptcy, however, once you are in this situation then it is important to make sure you make the right decisions. Bankruptcy may seem like a quick fix, but it has a huge number of lasting factors that will hinder you for a lot longer than five years An IVA, though, may not suit you and there may simply be no way for you to pay back your existing debt. Obviously both options have their advantages and disadvantages, so make sure to weigh them up before making any rash decisions. Seek professional help if you are particularly concerned, and make sure you have the support of your family and friends before trying to solve the problem all by yourself. Making financial decisions based on emotion is a bad idea, so surrounding yourself with good advice will help you a great deal.

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