So, you are thinking of taking advantage of an Individual Voluntary Arrangement to deal with the growing mountain of unsecured debt you have. While this solution is, at times, a much better alternative than bankruptcy for those who have significant financial problems, not everyone can take advantage of it.
Why?
Like bankruptcy, and many other alternatives, there are several restrictions with an IVA. If you are not willing to allow for these restrictions, you will not be able to obtain an IVA.
So, what are some IVA restrictions? Let’s take a look at what you will have to consider before you decide whether this type of debt management solution is right for you.
Restrictions With Your Individual Voluntary Arrangement
· Credit Records- When you enter into an IVA, you should be aware that the details of your IVA will be placed on your credit record for six years. Most IVAs last for a period of five years, so you need to understand it will be present for an additional year after you have completed the IVA. While this may seem bad enough, the implications of an IVA don’t always stop there. Even after it is removed from your credit report, creditors may ask if you have ever taken part in an IVA. As a result, you could end up paying higher interest rates on loans or being denied for the loans you need.
· Loans- While are in an IVA, you may have a difficult time obtaining additional loans. While most contracts will allow you to obtain £500 without approval from your IVA supervisor, any additional money will have to approved before you can take out another loan. You can also face higher interest rates because of your IVA.
· Homes- While taking part in an IVA will not mean you have to sell your home, you might have to remortgage it. Remortgaging releases equity, and it is usually required of homeowners whose homes have a net worth of more than £5,000. 15% of the net worth of your property, however, will be left to you.
· Bank Accounts- While not required, your IVA supervisor will most likely advise you to open up a new bank account, with a provider that is not related to your current creditors. If you put money into a bank account your creditors oversee, they could potentially take that money out without your approval to pay off the debt.
· Insolvency Register- When you take part in an IVA, your name is placed in the Insolvency Register and is a matter of public record until the completion of your Individual Voluntary Arrangement. Details on this record can include your name, birth date, employment, address, and information about your IVA.
· Credit Cards- All of your debt will be included in your IVA, including credit cards, so it makes sense that you will not be allowed to use these cards while you in the IVA. It isn’t likely you could use them anyway, though, as your creditors would most likely refuse to lend you more money during this time.
When you apply for an Individual Voluntary Arrangement, make sure you know exactly what you are getting yourself into. These restrictions can have a major impact on your life, and, while they are not as harsh as bankruptcy restrictions, they must still be taken seriously.
Martin Bradley is a representative of Harrington Brooks who provide IVA, Individual Voluntary Arrangements and Debt Management Plans to individuals struggling with debt. For more information please check out our site .