Individual Voluntary Arrangements are an excellent solution for persons who are facing a temporary set back in their finances but are expecting a revival soon. These arrangements between a debtor and his creditors require that the debtor makes small monthly payments over a period of time so that his outstanding debts may be written off at the end of the period. However, as is the case with other debt management programs, IVAs have their advantages and disadvantages.
With Individual Voluntary Arrangements, it is possible for a debtor to free himself from debt in five years so long as she/he makes the monthly payments on schedule. At the end of this period, his credit rating can improve.
Since IVAs are private agreements between the debtor and creditors, there is no bad publicity associated with it. Hence, a debtor does not have to worry about his reputation if he goes in for these agreements. However, it is possible to locate him on the insolvency registry if a person chooses to do a search. It is an alternative to the no credit check credit cards and no credit check payday loans.
Once a person enters into Individual Voluntary Arrangements, he is free from any further harassment from the creditors in the form of phone calls or letters. In addition, no further interest on outstanding amounts or late payment fees can be charged.
The best part of IVAs is that they protect the debtor from the likelihood of bankruptcy as long as he continues to make the repayments that were agreed upon.
A disadvantage of Individual Voluntary Arrangements is that the debtor has to have a minimum debt of £15,000 to be eligible for this scheme and this debt needs to come from 3 different creditors.
Another disadvantage is that in the event of the debtor not being able to make his monthly payments, the Insolvency Practitioner is bound by law to inform the creditors about any equity that the debtor has and this could be used to settle their debts after bankruptcy is declared.
Although the debtor’s outstanding balances are written off at the end of the period for which Individual Voluntary Arrangements extend, and his credit rating improves, he will still find it difficult to get credit for a 5-year period. In addition, he will not be able to get any unsecured loans during the period of the arrangements and any credit cards in his name may be canceled to prevent overspending and ensure that the creditors are paid.