IVAs Compared With Alternative Solutions

An IVA can be a suitable debt solution for many people, but there will always be advantages and disadvantages compared with other options. Here we explain the main difference between an IVA, Bankruptcy, Debt Consolidation Loans and Debt Management.

IVA Advantages Compared to Bankruptcy

  • Creditors agree to write off the debt you can't afford to repay.
    This is subject to maintained agreed repayments for 60 months. The actual value of debt write-off is dependant upon personal circumstances.
  • An IVA is a private matter and is not advertised.
    However your name and address will appear on the Individual Insolvency Register, as maintained by the Department for Business, Innovation and Skills.
  • You will not be subject to employment restrictions or lose your job.
    Unless there is a specific clause relating to IVAs in your employment contract.
  • You get to keep your home.
    You may have to re-mortgage to release equity in the final year of the IVA. In bankruptcy, you will lose your home if the equity in it is needed to pay debts.
  • All reasonable assets can be retained.
  • You may continue to run your own business
    In bankruptcy, your business will be wound up and your employees dismissed.
  • No question of rash or hazardous behaviour.
    In bankruptcy, you may become subject to a Bankruptcy Restriction Order if the Official Receiver considers you have been blameworthy and/or reckless in contributing to your bankruptcy.
  • No potential of judicial investigation into your finances.
    In bankruptcy, the Official Receiver will investigate your financial affairs and report any irregularities to the courts. This could result in criminal proceedings.
  • Under certain circumstances an IVA can result in an existing bankruptcy being annulled. This is called a Fast Track IVA.

IVA Disadvantages compared to Bankruptcy

  • You pay back more of your debt.
    This is an advantage for the creditors. The whole point of an IVA is to allow creditors to get back more of their money than they would via bankruptcy. In bankruptcy, you are only normally required to make payments from income for 36 months.
    With an IVA you agree to repay what you can afford every month for five years.
  • You can still be made bankrupt.

    If you fail to maintain the agreed IVA payments, your creditors may choose to start bankruptcy proceedings against you. This may leave you in a worse financial position than if you chose bankruptcy over an IVA in the first place as debt is only written off at the successful completion of the IVA.

IVA Advantages over a Debt Consolidation Loan

  • A portion of the debt can be written off with an IVA.
    With a consolidation loan, you may be reducing monthly payments, but will be repaying your debts in full, together with ongoing interest and charges over a longer term.
  • You're not putting your home at risk with an IVA.
    If you take out a secured loan on your property, you're increasing the risk of your home being repossessed if you fail to make repayments.
  • More room for negotiation later.
    If you consolidate your debts into one loan with one creditor, you will be in a weaker position to negotiate should you fall in to difficulties in the future.

IVA Advantages Compared to Debt Management

  • A portion of the debt can be written off with an IVA.
    On a Debt Management Plan, the entire debt is repaid.
  • An IVA normally lasts no more than 5 years.
    A Debt Management Plan lasts for as long it takes to clear the debt.

IVA disadvantages Compared to Debt Management

  • A Debt Management Plan can be for debts of just £1,500
    £12,000 is normally quoted as the minimum unsecured debt for an IVA
  • Minimum payments for a Debt Management Plan are £80 per month.
    £150 per month is the usual minimum for an IVA.
  • An IVA is a formal agreement, the terms of which less straight forward to alter should your circumstances change for the better or for the worse.
    A Debt Management Plan is an informal arrangement and is not legally binding for you or your creditors. This mean, if your circumstances change, it is easier to renegotiate payments to either higher or lower levels. If you think a Debt Management Plan may be the most appropriate solution for you, call us for advice and support.
The only way to truly know if you qualify for an IVA is to get professional advice.
We're Open: Mon to Thurs 9am-9pm,  Friday 9am-5pm,  Saturday 9am-3pm
*Calls are free from a BT landline. Other operators may charge.
You may also call us on 0161 972 3666.
Take 1 minute to get overview of your finances and detailed personalised analysis and advice.