Deceptive Promises and Glossy Ads

In recent years, the marketing campaigns surrounding Individual Voluntary Arrangements (IVAs) have become increasingly slick and persuasive, painting a picture of a perfect solution to overwhelming debt. Through glossy advertisements, captivating slogans, and well-crafted messaging, companies administering IVAs lure in individuals who are desperate for debt relief. However, behind these enticing façades lies a darker truth. The driving force behind such deceptive marketing tactics is often the substantial profits that companies stand to gain from the very individuals they target. The more clients they secure into IVAs, the more money flows into their coffers, creating a strong financial incentive to present IVAs as the ultimate panacea for debt woes. They can even make more money if your IVA fails! When you look at their websites, it is often really hard to find the downside of going into an IVA, but let me tell you, there is a very real and dark side to going into an IVA!

IVAs are Legally Binding Contracts

When individuals enter into an Individual Voluntary Arrangement (IVA), they are entering into a legally binding contract that comes with strict obligations and conditions. This means that once an IVA is approved, it becomes a formal agreement between the individual and their creditors, enforceable by law. The strict nature of IVAs extends to various aspects, including property and payment terms.

IVAs and Property

One crucial aspect of an IVA is the treatment of property. While IVAs can/may help individuals protect their assets, it’s important to understand that certain conditions may apply. In some cases, individuals may be required to release equity from their property during the course of the arrangement. This means that if the value of the property has increased significantly, the individual may need to remortgage or sell the property to release a portion of the equity for the benefit of creditors and possibly the IVA company. Failure to comply with such requirements can jeopardise the IVA and potentially lead to further consequences.

IVA Payments

IVAs are structured repayment plans, and individuals are expected to make regular payments as agreed upon in the contract. The payment amount is determined based on the individual’s income, expenses, and the agreed-upon terms of the arrangement. It is crucial to adhere to these payment obligations diligently, as missing payments or failing to meet the agreed-upon terms could result in severe consequences. Creditors may challenge the IVA, potentially leading to its failure, and individuals may be exposed to further legal actions by creditors seeking to recover the outstanding debts.

The strictness of IVA contracts is intended to ensure that individuals honour their commitments and work towards repaying their debts. It is essential for individuals considering an IVA to fully comprehend the terms and obligations outlined in the contract. Seeking professional advice from an insolvency practitioner or a qualified financial advisor can provide a clear understanding of the contractual obligations and potential implications before entering into an IVA. BUT finding impartial advice is the PROBLEM!

Understanding the Potential Dangers

When an Individual Voluntary Arrangement (IVA) fails, individuals may find themselves facing a range of serious consequences, both financially and legally. The failure of an IVA can be a distressing situation, with significant implications for the individual’s financial future. It’s crucial to be aware of the potential dangers associated with a failed IVA.

Financial Repercussions: One of the immediate dangers of an IVA failure is the resurgence of financial pressure. If an individual is unable to meet the obligations of the IVA, such as making regular payments or fulfilling other terms of the agreement, the arrangement may be deemed unsuccessful. In such cases, creditors regain the right to pursue the outstanding debts. This could lead to increased harassment from creditors, including demanding payment in full, initiating legal actions, or engaging debt collection agencies. The individual may face the risk of asset seizure, wage garnishment, or even the potential loss of their home.

Negative Impact on Credit Rating: The failure of an IVA has a significant impact on an individual’s credit rating. IVAs are already recorded on credit files, indicating that an individual has sought a debt solution. However, a failed IVA will further damage their creditworthiness. This can make it challenging to obtain credit in the future, such as loans, credit cards, or mortgages. The negative impact may persist for several years, hindering the individual’s ability to access credit or secure favourable terms when it comes to financial matters.

Legal Consequences: In some cases, if an IVA fails and the individual is unable to meet their debt obligations, creditors may choose to pursue legal actions, such as petitioning for bankruptcy. Bankruptcy is a formal legal process that can have far-reaching consequences. It involves the individual’s assets being assessed and, in some cases, liquidated to repay creditors. Bankruptcy stays on a credit file for a significant period and can affect future employment prospects, business ownership, and personal finances for years to come.

Your IVA Company May also Petition for Your Bankruptcy: Yes, the company administering your IVA, may also look to making your bankrupt (the cynical side of me says they will do this, if there is more money to be made from putting you into bankruptcy).

Read Your IVA Contract Before Signing

Entering into an Individual Voluntary Arrangement (IVA) is a significant financial decision that should not be taken lightly. It is crucial to thoroughly read and understand the terms of the IVA contract before signing. One key aspect to consider is the duration of the arrangement. IVAs typically span over a period of five to six years, requiring individuals to adhere to the legally binding contract for a substantial amount of time. This lengthy commitment necessitates careful consideration of personal circumstances, as financial situations may change during this period. Understanding the long-term nature of an IVA is essential to ensure a realistic assessment of one’s ability to meet the obligations throughout its duration.

Additionally, individuals contemplating an IVA often have concerns regarding the safety of their property. While an IVA aims to provide individuals with a manageable debt repayment plan, it is important to understand that there may be implications for property ownership. Depending on the terms outlined in the IVA contract, individuals may be required to release equity from their property to contribute towards the repayment of their debts. This may involve remortgaging (can you afford a remortgage?) or selling the property to release a portion of the equity for the benefit of creditors. Understanding the potential impact on property and seeking professional advice can help individuals make informed decisions based on their specific circumstances.

Equally important is comprehending the potential consequences if the IVA fails. While the goal is to successfully complete the IVA, unforeseen circumstances may arise that make it challenging to fulfil the obligations. In such cases, it is essential to understand the implications. If an individual fails to meet the requirements of the IVA, creditors or the company administering the IVA may choose to take legal actions, potentially leading to the individual’s bankruptcy. This can have far-reaching consequences, impacting credit ratings, financial stability, and personal circumstances. This post; Standard Conditions for Individual Voluntary Arrangements will also give you an insight of what could/will be included in your IVA contract.

By reading the IVA contract thoroughly, you can gain a clear understanding of the time commitment involved, the potential implications for your property, and the consequences of a failed IVA.

Further IVA Reading

If you have managed to get this far, in order to read about some of the problems relating to IVAs you may also be interested in; What if My Individual Voluntary Arrangement Fails or this post on; Pros and Cons of an IVA.

I hope that by reading this post, it will get you thinking about your own situation. If you need time to think and research different debt solutions, then why not put yourself into a Debt Management Plan? This way, you will keep creditors happy and you then have time to research the different debt solutions that are out there.