IVA pros and cons: what to weigh up before you apply

The advantages of an IVA

Here are the main reasons people choose an IVA:

• One monthly payment based on what you can genuinely afford
• Interest and charges on included debts are frozen
• Creditors included in the IVA cannot take further legal action against you
• Remaining included debt is written off when the IVA ends successfully
• It can help protect your home compared with bankruptcy
• Your job is less likely to be affected than with bankruptcy

The disadvantages of an IVA

It is just as important to understand the drawbacks:

• It stays on your credit file for six years
• Your name appears on the public Insolvency Register during the arrangement
• It usually lasts five to six years, which is a long commitment
• Homeowners may need to release equity in the final year
• Any windfalls, such as an inheritance, may need to go towards your debts
• If you cannot keep up payments, the IVA may fail

What happens if my income changes?

Your income and outgoings are reviewed each year. If your circumstances change, for example through job loss or illness, your insolvency practitioner can ask creditors to agree a payment break or reduced payments. Speaking up early gives you the best chance of keeping the arrangement on track.

Alternatives to consider

If your debts are smaller, a debt management plan may be more flexible. If you have very little spare income and few assets, a Debt Relief Order might be more suitable. In Scotland, a Protected Trust Deed works in a similar way to an IVA.

More guides

• What is an IVA? A plain-English guide to Individual Voluntary Arrangements
• What is a debt management plan (DMP) and how does it work?
• Debt management plan vs IVA: which is better for you?