Is your IVA (still) right for you?

25 July 2008

Is your IVA (Individual Voluntary Arrangement) still right for you? If you’re in an IVA, you might hear about other debt solutions that sound easier, faster, cheaper, or all three.

Usually, if something sounds too good to be true, there’s a good chance it is. After all, nobody signs up to a five-year commitment like an IVA without thinking long and hard about it. Plus, debt advisers are legally obliged to explain the pros and cons of (and the alternatives to) an IVA to anyone who’s thinking about starting one. Debt management, consolidation loans, bankruptcy – if any of these debt solutions was more appropriate, your debt adviser should have suggested it before your IVA began.

Even so, things change. If your finances have changed (a great deal) since your IVA began, it’s possible that following your IVA through to the end as planned is no longer the best way for you to clear your debts.

If, for example, you’re in an IVA and:

• you inherit or win enough money to pay off a substantial portion of your outstanding debt, you may be able to make a ‘full and final settlement’ of your IVA,

or

• you lose your job or suffer some other major financial setback, you may need to
  • ask for a Variation of your IVA, or even
  • find out about alternatives such as a debt management plan or (as a last resort) bankruptcy.

But no matter what happens, you should NEVER just stop making payments to your IVA. Even if your life has changed drastically, it’s essential to talk to the company that’s running your IVA before you do anything – and the sooner you talk to them, the easier it will be to take any action that’s necessary.

And you should NEVER quit the IVA and enter into bankruptcy without talking to that company and fully understanding the consequences. Bankruptcy may be right for some people*, but the Insolvency Service itself has stated that:

‘The principal statutory alternative to an IVA is bankruptcy. Bankruptcy should always be the last resort as the debtor will lose control of their assets and will be subject to bankruptcy restrictions, potentially up to 15 years.’

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*In the first three months of 2008, there were 15,651 bankruptcies in England and Wales, and 9,614 IVAs.

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