The Hidden Risks of IVAs: What You Need to Know

Individual Voluntary Arrangements (IVAs) may seem like a saving grace for those grappling with insurmountable debt. Positioned as a viable alternative to bankruptcy, IVAs indeed offer a structured route to financial recovery. Yet, beneath the surface, these seemingly beneficial agreements Harbour concealed perils that could further complicate your financial predicament if you’re not careful. In this blog post, we’ll take a closer look at the hidden risks of IVAs to ensure you’re well-informed before considering one.

Understanding Mis-Selling

First and foremost, it’s vital to comprehend the concept of mis-selling. Mis-selling occurs when a company persuades you to commit to a financial product or service that doesn’t suit your financial needs or circumstances. This issue can manifest in several ways:

• Inadequate Assessment: Companies may neglect to conduct a thorough evaluation of your financial situation, resulting in a mismatch between your needs and the IVA offered.
• Poor Disclosure: You might not receive proper disclosure of the potential risks and drawbacks of the IVA, leaving you ill-prepared for what lies ahead.
• False Promises: Some companies might exaggerate the benefits of IVAs, portraying them as quick and effortless solutions when, in reality, they often involve complex, long-term processes.

“According to a report by the Insolvency Service, the average fee for setting up an IVA is £3,500. However, some companies charge much more than this. For example, one company was reported to be charging fees of up to £10,000.”

“In addition to the initial setup fee, IVA companies also charge ongoing fees. These fees can range from £50 to £100 per month. This means that the total cost of an IVA can be very high, especially if it lasts for several years.”

Mis-Selling within IVAs

IVAs are particularly susceptible to mis-selling, posing a significant threat to your financial well-being. Here’s how:

• Targeting Vulnerability: Unscrupulous companies may prey on individuals already experiencing financial vulnerability, making them easy targets for mis-sold IVAs.
• Over-promising: Mis-sellers might make unrealistic assurances, leading you to believe that an IVA is a shortcut to debt relief, despite the intricate and protracted nature of the process.
• Inadequate Disclosure: The potential downsides of IVAs, such as their impact on your credit rating, might not be adequately explained by these companies.
• Excessive Fees: Mis-selling can come with substantial financial implications, including excessive fees for services rendered.

Property and IVAs

Another concern with IVAs revolves around property ownership. While IVAs safeguard your home from creditor repossession, exceptions exist. If you possess significant equity in your home, creditors may request that you release some of it to settle your debts. Understanding the property implications of an IVA is essential to protect your assets.

Can I protect my property when opting for an IVA?

While IVAs generally safeguard your home from creditor repossession, there are exceptions, especially if you have significant equity. Creditors may request you release some equity to settle debts. Discussing your property with an insolvency practitioner before starting an IVA is crucial to understanding potential risks.

What if an IVA Fails, Possible Bankruptcy

Should your IVA fail, the real possibility of bankruptcy looms. Creditors can initiate a “creditor’s bankruptcy petition” if you fail to meet your IVA terms, especially if you fall behind on repayments. However, it’s crucial to note that bankruptcy isn’t an automatic consequence of IVA failure. The court will only declare bankruptcy if it is deemed in the best interests of your creditors. It is possible that your IVA company could also make you bankrupt if your IVA fails!

Conclusion: Exercise Caution

In conclusion, IVAs provide a glimmer of hope for individuals striving to regain their financial footing, but they aren’t without their pitfalls. The hidden risks, including mis-selling, property implications, and potential bankruptcy, underscore the importance of proceeding with caution. Before committing to an IVA, seek independent financial advice to ensure it aligns with your specific financial situation. Understanding these risks will empower you to navigate the complex terrain of debt relief more effectively and safeguard your financial future.

IVA Further Reading and Research

We would advise that if you are considering going into an IVA, the do search this site for more information eg. What if My IVA Fails?. Also do not just rely on what is written on the Johnny Debt website, but do search for other sites that are NOT linked to IVA companies!