IS AN IVA A GOOD SOLUTION TO YOUR DEBTS?
If you have a lot of debt and you can’t afford to pay it, then you might want to consider an IVA. This is an individual voluntary agreement to pay off your debts at a reduced rate, over a period of five to six years. At the end of that time, any debts that are remaining will be written off.
An IVA is a good solution if you have some debt, and cannot afford to pay it back at the amount that your creditors want, but you can afford to make some payments. When you enter into an IVA, your spending will be restricted. Your credit rating will suffer, and your details will be entered into the insolvency register. This register can be searched by anyone, including members of the general public, but in practice it is usually just creditors that will search the register.
An IVA is a better option than bankruptcy for a lot of people. Especially if you are a company director. You cannot be a director of a limited company while you are an undischarged bankrupt, but there is no such provision for IVAs. Some companies do have a rule in their own articles which says that if you have an IVA you cannot remain a director, but that is their own internal policy, not a legal requirement.
An IVA is not an option for someone who wants to be a charity trustee, however, as the charities commission forbids people with IVAs from holding trustee positions.
If you have debt, and you want to make an effort to escape from it, then the best thing to do is seek financial advice, and find ways to repair your credit rating. If you can stick to an IVA then you will be debt-free at the end of it. However, you should be aware that if the IVA fails then your creditors can apply backdated interest, so you could end up still owing a lot of money.
For this reason, you should only start an IVA if you are confident that your income is only going to remain the same or go down, and that your situation is stable in terms of outgoings as well. For some people, a DRO or bankruptcy is a better option. Do not make any decisions until you have spoken to an expert about your options.
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