We often on this site extol the virtues of IVA’s. They do indeed work as a great debt solution for many people. But not for everyone! And if you find yourself being pushed towards an IVA without any explanation of the negative consequences – a little more research is required.
One of the reasons there are so many questions on the Forum we help run, is that companies “selling” IVA’s can gloss over anything that might get in the way of a “good sale”. And once we are in the IVA we may find that we are faced with something we had not expected or were ready for. We may have a justifiable complaint against someone for “miss-selling” but the harsh reality is that it is our IVA and we signed up to it.
So – what are the potential downsides to an IVA?
- Credit rating – most people entering an IVA are aware that their credit rating will suffer and access to credit will not be a realistic option for the length of the IVA plus 12 months. Then though the existence of the IVA and the debts disappear from our credit history, it may take some while to rebuild our credit score
- Windfalls – some are unaware that if they were to receive a windfall such as a PPI claim or some inheritance, this is likely to be made available to the IVA. Sometimes people who have successfully completed an IVA are informed of a PPI windfall, but even then it may well be payable to the IVA, because although unknown at the time, the asset existed at the time of the IVA.
- Changing circumstances – some people in an IVA assume that the agreed monthly payment is fixed for the duration of the IVA. This is not the case. Reviews are held and if our financial circumstances have changed then the IVA payment level could change accordingly.
- If we have joint debts with our partner/spouse our IVA doesn’t protect them from responsibility for the whole debt
- - Homeowners – an IVA provides legal protection, so the property cannot be taken to raise funds to pay off more of the dent. But we will need to try and release equity by remortgaging towards the end of the IVA. This is very often not possible, but creditors are likely to insist on a 6th year of IVA payments instead.
All in all, it pays to know all the facts before entering an IVA.