Top 6 Advantages of an Individual Voluntary Agreement

An Individual Voluntary Arrangement can be a great solution for anybody who is faced with an overwhelming debt problem. It is a repayment plan that is set up by the Individual Voluntary Arrangement company, who act as a kind of mediator between the debtor and their creditors. It is a legally binding agreement and brings many advantages for the debtor, especially in the face of financial ruin and when the only other alternatives are a debt management plan or bankruptcy.

Debtor is in control
When somebody is in mountains of debt, their creditors control their lives. Be it mortgage companies, credit card companies or banks, they will be bombarded with telephone calls and debt collection letters. They will live in constant fear of the bailiffs calling round, and they will feel like they are constantly under threat and pressure. Essentially they can feel like they are no longer in control of their own lives.

With an IVA, the debtors can regain that control. This is because during an IVA the creditors are not allowed to contact the debtors directly, meaning no bailiffs, threatening phone calls or threatening letters. A creditor can only talk to the IVA company for the duration of the agreement.

Only pay what you can,
As an Individual Voluntary Arrangement is based upon the income of the person in question, it means that their repayments are only what they can afford to pay each month. This means that not all of the debtor’s money is tied up paying off debts. It also means that they pay back what they need to each month, whereas if they were paying what the creditors wanted they would more than likely be missing payments each month and going further into debt.

You do not pay the entire amount of the debt
What happens with an Individual Voluntary Arrangement is that it lasts for a set amount of time and you pay back what you can each month. When it is over you are free from the debt. This means essentially that the debt gets cut down, by the time you get to the end you have only paid a percentage of the total debt.

Legally Binding
Unlike a debt management plan, an Individual Voluntary Arrangement is legally binding. It is a formal agreement that the creditors cannot contact you or request more money. A DM plan is an informal agreement with a company mediating, and at any point the creditors could decide they want the full amount and start threatening again. An IVA would stop this happening.

Privacy
An Individual Voluntary Arrangement offers privacy for the debtor. If bankruptcy is the only other option this might be the only way. With bankruptcy it is declared publically, meaning it must be declared to an employer. There are a lot of jobs, especially in the financial sector, that would sack somebody for going bankrupt. An Individual Voluntary Arrangement is completely private so therefore does not have to be declared to an employer.

Lack of social stigma

There is a lot of stigma surrounding bankruptcy, with people being seen in a different light as soon as it happens. This can have really bad effects for the bankrupt person, but with an Individual Voluntary Arrangement nobody has to know and even if you do tell them it doesn’t hold with it the same stigma as bankruptcy.