The top 5 IVA myths answered

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Published: 16th December 2011
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We consider some of the key myths that surround the IVA debt solution and find out whether there is any truth behind them.

If you are trying to decide how to solve a personal debt problem, one of the debt management solutions you are likely to consider is an IVA or individual voluntary arrangement.

There is a lot of IVA advice available but as you read different information and even speak to people about individual voluntary arrangements you might come across some myths about IVAs which are simply incorrect.

Some of these myths are uncovered below.

If I do an IVA my partner will have to pay for my debts

Unless they are joint named account holders or have given a personal guarantee, then no third party can become responsible for paying any of your debts.

As such, if you decide to carry out an IVA your spouse or partner cannot be made liable for your debts as well.

Having said that if you are living with your partner you will normally have to include their income in your income and expenditure statement before your IVA can be agreed.

The reason for this is that they will be expected to contribute to the household expenses according to their income. You cannot say that you pay for everything from your income alone and therefore artificially reduce the amount you can pay into your IVA each month.

If my IVA is rejected I have to go bankrupt

Individual voluntary arrangements and bankruptcy are seen as alternatives to each other. As such, if you propose an IVA to your creditors you will hear and see the word bankruptcy.

Carrying out an IVA is a serious matter and it is true that if you start and IVA and then you cannot continue to pay it and it fails, there is a risk that you could be forced into bankruptcy, particularly if you are a homeowner.

However, if you propose an IVA to your creditors and they decide to reject the proposal before it even starts, then you are definitely not forced to go bankrupt.

In fact nothing happens to you if your IVA is rejected. You simply have to decide on an alternative debt management solution.

In this sense you should certainly not be put off applying for an IVA by the worry of what might happen if it does not go through.

If I do an IVA I will never be able to get a mortgage

One of the key things to understand about individual voluntary arrangements is that if you start one your credit rating will be negatively affected.

The fact that you have started an IVA will be recorded on your credit file and this will make it more difficult for you to borrow more money.

However, this situation will not last forever. The record of your IVA on your credit file will be taken off six years. Your credit file will then start to repair and your chances of borrowing money again will steadily improve.

Once your IVA is finished and your credit rating is improving you will be able get a mortgage although in the short term you may still be restricted to more adverse interest rates.

If I do an IVA I will lose my house

Starting an IVA does not mean that your property will be put at risk.

Individual voluntary arrangements actually protect a homeowner’s property from further legal actions which would risk the property such as an application for a charging order or even bankruptcy.

In addition, your mortgage and any secured loan payments are ring-fenced when you start an IVA so you will always have enough to be able to pay these and will not risk getting into arrears because you are trying to pay other debts.

However, as a homeowner it is important to understand that as part of your IVA, you will be obliged to release equity from your property to increase the amount paid back to your creditors.

Once my IVA is agreed my payments will never change

Individual voluntary arrangements normally last for a period of 5 years. During this time you make a payment each month towards your debt based on the amount you can afford – your disposable income.

The payment you make is agreed at the beginning of your IVA. However this payment may be subject to change if your financial circumstances get better.

If your income improves because you get a better job your income and expenses will be reviewed and if you can afford to increase your IVA payments you will have to do so.

If you receive overtime or a bonus payment you will normally have to pay up to 50% of this into your IVA in addition to your normal monthly payment.

In the same way, if you receive a windfall such as an inheritance payment this will have to be paid into your IVA in addition to your normal payment.

Of course, if your circumstances do not change and you get no additional money through the course of your IVA, your payments will not change.

Get the right IVA advice

An individual voluntary arrangement can be a very good way to solve a personal debt problem. However the affect of an IVA will be different for different people.

Before you apply you must understand exactly what starting an IVA will mean for you based on your personal circumstances.

If you are fully informed and understand the implications for you, IVAs will no longer seem a daunting and worrying prospect.

The best thing to do is get IVA advice from a debt management solution expert who can explain exactly how the IVA will work for you.


James Falla is a debt management solutions expert and author. He has fourteen years of experience of implementing individual voluntary arrangements for people who are struggling with personal debt.

In 2004 James co founded Thomas Charles a specialist debt management solutions company where he personally helped over 1000 clients implement individual voluntary arrangements. James is now the managing director of and senior debt advisor for Wilmott Turner Financial Services which operates debt solution websites such as http://www.beatmydebt.com/.

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