Know about the benefits and risks of individual voluntary agreements
The individual voluntary agreements are known as the IVAs which are processed in the UK. The process depicts that any individual is eligible for the individual voluntary agreement if s/he is deeply sunk in debt and wants to avoid bankruptcy. The IVA is a legally binding agreement that is agreed between the debtors and creditors. The amount varies to a huge extent and depends solely on the financial condition of the debtor. The creditors may not agree to the overall regulations of the agreement, but as a matter of fact, they do choose for the individual voluntary agreements because it becomes more beneficial for them instead of making a person bankrupt. That being said, there are a lot of pros and cons present in the IVAs and in this article we are going to discuss about the benefits and probable risks that can take place within an IVA agreement.
One of the major benefits is the financial condition of a person is left to remain confidential as the bankruptcy announcements are mostly broadcast in the TV or news paper; but this is not with the case of IVAs. Though the creditors still might consider the debtor as a risk since this does not appear on the credit report. The agreement is solely done between the debtor and creditor.
Another positive aspect of the IVA is that within the period of time, they are really very much effective and can be paid off easily since and a period of five years is long enough in paying an agreeable amount. Within that period, almost all the debts can be covered or cleared up; and the rest of the debt is written off. On the other hand, bankruptcy runs out within one year and the cost of bankruptcy is much more than an IVA.
As per IVA experts http://www.ivaplan.co.uk/, an IVA offers much more protection than any of the debt management schemes. Once a creditor agrees to a fixed amount to get repaid per month, he/she cannot deny or withdraw from the agreement. But any other debt arrangement process does not allow such features because those are not legally binding. The IVA will show up on any credit report similar to any file for bankruptcy; but the difference is, the IVAs portray the debtors’ willingness for repaying the debts while in case of bankruptcy, the debtor has surrendered that he/she cannot repay the debt.
Now let us have a look at the possible risks that might be involved with the individual voluntary agreements.
- With the acceptance of individual voluntary agreements, the individual’s credit rating can be affected for a certain period of time.
- The banking options will be restricted and certain facilities like overdraft, credit card or the cheque will not at all be approved by any individual’s bank. Only a simple bank account will be allowed.
- There will not be any cancellation clauses and so the payments cannot be stopped if it does not suit the creditor.