If you have been on the internet now many Debt help companies are advertising Individual Voluntary arrangements in order to avoid bankruptcy. At first these schemes may seem as an Angel of Light, in reality it can mean a penniless existence for five or six years, the fact you cannot pay your debts as they fall due does not been you can manage by giving up every penny of your income for the next five or six years, what about the effect of this on the rest of your family, do your children have to suffer too.

Why do so many IVAs fail (About one in three)

Mainly because they are so unaffordable over such a long time, and are sold in a way where debtors believe they will be paying far less than they owe, but is this a myth,

When you get into debt it is usually because you have taken credit to support living expenses, perhaps the car broken down, expenses for home improvements, credit for holidays because things are going well at work, many reasons we take credit.

When you start an IVA you now owe far more than before you went into the IVA because for the duration of the IVA you ALWAYS owe 100% of your debt plus interest, but you also now owe a few thousand pounds in IP fees. As you begin your five to six year journey living in austerity there is not only no credit to pay when the car breaks down, or the boiler, or any other emergencies but you also have to repay your debts from the past using 100% of your excess income, if you lose your job or become ill, you can request a payment holiday for usually six months but then your IVA is extended six months providing that period is sufficient to either recover from the illness or find another job.

Debtors will only pay less in an IVA, IF they complete the arrangement, to the satisfaction of the creditors, Perhaps you were not told this at the inception but it will be somewhere in the small print.

When is an IVA the best option over anything else? 

Imagine a business man with a small factory and some machines who falls on hard times and is moments away from insolvency, pushed into bankruptcy by his creditors.

His business is closed down his machinery sold off for nothing. He loses his livelihood and his creditors get nothing. No-one wins in this situation but an IVA comes into its own here. Imagine if he meets with his creditors with a proposal that he is allowed to keep his business avoid bankruptcy and use his business to pay his creditors all he can for a set period of time which will allow him to pay at least a good chunk of his debt back. An Insolvency Practitioner will have to supervise the arrangement who also needs to be paid who acts on behalf of the creditors. If he keeps this arrangement going for at least five years he is released from the balance that he owes which will allow him to again lead a normal debt free existence. This is a Win Win situation for the debtor and his creditors, and is the prime reason an IVA came into existence.
However in reality the IVAs are now being sold to individuals who really should never been considered for such expensive schemes. Individuals who don't own businesses that can fund these schemes sometimes individuals who don't own property at all, before you enter one of these schemes you need to ask yourself, we live in uncertain times, Is my job safe for the next five years? Will I stay healthy? What if the car needs repairs? What if the washing machine breaks down? Because all of your excess income on a tight income and expenditure budget will be handed over to your creditors, an IVA will allow you a contingency fund it’s normally though only £1.66p per day.

Let’s face it whether it's IVA or Debt Management or Bankruptcy life is pretty difficult right now, do you want to spend your years worrying about debt, or are you more interested in getting you and your families life back on track, if the IVA fails you are back to square one having paid a fortune in fees to an organisation you never owed any money.

Read what Martin Lewis of Moneysavingexpert.com says about IVA's HERE

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