For those who find themselves unable to pay back the money they owe, an IVA, or Individual Voluntary Arrangement, is becoming an increasingly common solution. But what is an IVA and what are the benefits?

Essentially, an IVA is a government introduced solution for those who become insolvent. It’s a formal agreement between you and your creditors, normally lasting five years, in which they accept reduced payments for that period of time. Once the set time is over, your debts are considered to be settled in full.

But like any form of debt solution, there are pros and cons of an IVA.

Advantages of an IVA

-          There is the potential of having debt written off. Anything that remains unpaid from the original outstanding balance at the end of the five year period is simply written off, provided you meet your monthly payments throughout the course of the agreement.

-          Providing you meet your monthly payments, your home is not at risk.

-          The agreed monthly payments are always based on what you can realistically afford, taking into account your earnings and your living expenses. This means that your payments on an IVA will be manageable.

-          An IVA is a private agreement, which means it will not become public domain information (as bankruptcy does). This also means that your employers will not be informed of your entering into an IVA either.

-          You have legal protection from creditors, who cannot take legal action against you throughout an IVA, nor can they even contact you.

Disadvantages of an IVA

-          An IVA is a legal agreement and while this offers the debtor some protection, it also means that failure to keep up with the payments could lead to severe consequences, including your creditors forcing you into bankruptcy.

-          An IVA will be noted on your credit record and will stay visible there until 6 years after it ends.

-          You are not allowed to take out any credit while in an IVA agreement. If you fail to comply with this, your IVA could be failed completely and you may end up forced into bankruptcy.

There are certainly both advantages and disadvantages to an IVA and as with any long term financial decision, it should not be taken lightly.