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IVA Disadvantages

Individual Voluntary Arrangements (IVAs) have a number of disadvantages which anyone contemplating this course of action should think about before entering into the IVA agreement.

  • The debtor in an IVA is unable to take further credit out during the course of the IVA
  • The debtors credit rating will be adversely affected
  • IVA payments can increase if the debtor earns more or comes into a windfall during the IVA. The IVA repayment is set at a "reasonably affordable" level at the outset but can change or be paused over the 5 years due to changes in circumstances.
  • At least 75% of creditors who actually vote – many often dont actually vote at all! – have to vote in favour of an IVA. Therefore if the debtor has a creditor who is responsible for more than 25% of the total debt, and such creditor votes against the IVA, then the IVA proposal will actually fail.
  • certain circumstances a debtor without assets or significant income may be financially better off simply applying for bankruptcy. After the new Law on bankruptcy was passed under The Enterprise Act a first time bankruptcy now only lasts for one year with a repayment period of 12 months to 36 months (Income Payments Order). In an IVA the repayment period lasts normally for 60 months so the debtor is committing to repay for a longer period than would be the case in bankruptcy. Obviously many people will opt for an IVA to avoid the social stigma of bankruptcy.

AnIVA is unique to each set of individual financial circumstances. There may be situations where an IVA is a disadvantage e.g. under the new Licensing regulations for Publicans an IVA automatically means loss of License – and therefore an inability to provide income – whereas previously only a bankruptcy would have impacted in this way.

Whatever your circumstances please contact us either via our enquiry form or by calling freephone 0800 043 50 43 to determine whether an IVA will leave you at a disadvantage.

Is an IVA right for you

Answer a few simple questions and we'll help you find your solution.

Total unsecured debt : £4000


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The IVA Advice site is owned by Guardian Insolvency Ltd. Guardian Insolvency Ltd is registered in England and Wales No. 07906134 whose registered address is Coppull Business Centre, Mill Lane, Coppull, Chorley, Lancashire, PR7 5BW. Data Protection Number: ZA093360