What are the pitfalls of an IVA?

< Return to previous page

Should you find yourself in this position an Individual Voluntary Arrangement (IVA) seems or at least’s sounds better than bankruptcy doesn’t it? An IVA may look like the best alternative but it’s not without its pitfalls.

On face value reducing your debts by up to 75% with one manageable monthly repayment may appear attractive but remember you are locked into a fixed repayment term which could mean you end up paying more in the long run as you lender or creditor will continue to add interest, which maybe as a result of the IVA switched to a variable of higher rate and they may as part of the agreement add late payment charges for anything up to a maximum of twelve months.

Under the terms the lender or creditor can review the agreed amount being repaid each month. They can adjust the repayment to cover the higher rate of interest on the account which means that at the end of the five year term you have only repaid the interest NOT the original borrowing. Equally they have the power to break the agreement and pursue you for increased repayments or even add additional interest further increasing the total amount you have to repay!

Make an informed decision

Before considering an IVA as a viable option or anything that may affect your short or long term financial stability it makes perfect sense to seek professional advice on your situation and consult:

An Independant Financial Advisor: more information

The Citizens Advice Bureau: more information (opens in new window)