What are the disadvantages of an IVA?

If you do not keep to the terms of the IVA then the IP or your creditors can make you bankrupt.

If creditors do not accept the IVA proposal you are back to square one and your creditors can carry on trying to pursue you for your debts.

If you paid an up-front fee for your IVA and it is not accepted then you will have lost the fee and be in a worse position than when you started.

If you own your house the IP and creditors may make you agree to sell your house as part of the IVA. It is standard for IVA agreements to include a clause that you will get your house valued after a set number of years with a view to giving most of the value or 'equity' in your house to the creditors.

You may be able to pay instalments for an extra year to cover the amount of equity in your home. However it could mean selling your house if you cannot raise the money. Your options may include you or a partner taking out a new loan and even securing it on your house. This may be difficult as your credit rating may not be good enough to get a loan through a reputable lender and you would be putting your house at risk.

There is a risk that the IVA is agreed on the basis of monthly payments that you cannot afford long term. You must be very careful that the payments are set at a realistic amount in the first place.

If your circumstances change and you can no longer afford the payments your IVA may end if the IP cannot persuade the creditors to accept a new agreement.

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