Why Go For IVA Debt Arrangements Instead of Bankruptcy?

If you feel that you can no longer manage your debts, seek assistance immediately. You do not need though to file for bankruptcy at once. Look for other alternatives which can effectively help you in eliminating your debts. Have you heard of IVA debt arrangements?

IVA stands for an 'individual voluntary arrangement'. This is an alternative to filing for bankruptcy, an IVA debt arrangement though is less restrictive. An IVA is simply an arrangement between you and your creditors, for you to repay an agreed percentage of your debts over a period of time. An IVA debt scheme is usually for a period of 5 years. If after 5 years you have adhered to your agreement but still have not paid off your debts, any of your outstanding debts are generally written off. There are expert debt solutions companies that have insolvency practitioners who can help set up an IVA for you.

IVA Debt Scheme versus Filing for Bankruptcy

Normally, an IVA debt arrangement can only be initiated by a debtor, unless you are an undischarged bankrupt in which case your trustee or bankruptcy court can do this for you. Before you go ahead with an IVA debt scheme, ensure that you carefully weigh its pros and cons.

• Current assets - these include your home, investments and savings. You still risk losing these assets but at lower risk than bankruptcy. IVA debt schemes are more flexible since creditors usually require realisable assets and savings to be encashed, thereby generally leaving your home safe except for a release of equity at the end of your IVA.

• IVA fees - there are administration fees and other expenses to cover.

• Effect on future credit same as bankruptcy, an IVA debt arrangement does affect your future credit. You cannot get any credit while an IVA is in place. Once you have finished an IVA debt scheme, receiving new credit is possbile but it will remain difficult as you will be considered a greater risk by lenders.

• Effect on your reputation - an IVA debt scheme does not have the same stigma as bankruptcy, although even the stigma around being a bankrupt is reducing. This scheme only has very minimal impact on your reputation. Of course it will still be recorded and be reflected in your credit file, but in a very discreet manner.

After you have carefully considered the advantages of initiating an IVA debt arrangement, if you want to go ahead, the next step is to work with a debt management company so they can set it up.