With the average household debt in the UK being £13,520 and growing, and with 100,000 people each year declaring bankruptcy, an open dialogue about debt and debt management solutions is increasingly important. The more information we have, the less daunting debt seems, and the more mentally prepared we will be to resolve our financial issues.
IVAs are a great alternative to bankruptcy. Opting for an IVA means that you no longer need to be in contact with your creditors. You repay monthly, affordable sums to your Insolvency Practitioner and, upon completion of your IVA, the remaining debt is written off and you can begin to rebuild your credit rating.
There are a number of inaccurate and misleading facts circulating about IVAs and, for the sake of clarity, it is important to separate fiction from reality. It is only when you have all the appropriate and correct information that you can make a decision about which debt management solution is truly best for you and your current circumstances.
Below are just a few of the most prevailing IVA myths:
I will lose my family home
The prospect of potentially losing your home is a common worry among those with extreme debt. However, when you consider the reality of what the IVA and your creditors are trying to accomplish, it wouldn’t serve much of a purpose to make you homeless. Everyone wants you to be as secure as possible so that you can continue on with your everyday work and make money in order to make your monthly repayments. So don’t let this one IVA myth deter you from exploring this option; you will never be left homeless.
Having said this, if you have a substantial amount of equity in your house, it is very possible that you will be asked to downsize. This would mean that you would have an increased amount of money to repay your creditors. This is considered a reasonable request, and if you refuse to entertain the idea, your IVA proposal will likely be rejected. All of this information will be stipulated in your IVA’s ‘equity clause’ and explained to you by your Insolvency Practitioner.
I will have to sell my wedding ring
You will have to make a number of sacrifices throughout the duration of your IVA. You’ll have to sell off many possessions of value in order to repay your debts and satisfy your creditors. However, you will be happy to know that sentimental items such as your wedding rings, engagement rings and family heirlooms will be exempted. Rest assured that the selling of your rings is never something your Insolvency Practitioner will request.
I will go bankrupt if my IVA is rejected
There are always options open to you with regards to debt management solutions. If your IVA is rejected, the first port of call is for your Insolvency Practitioner to liaise with your creditors to determine the reason, or reasons, behind the rejection. Once this is known, it is entirely possible for you to right these issues — and if you do so, your IVA will more than likely be accepted. However, if it is once again rejected, you have other debt management options open to you that will be detailed by your Insolvency Practitioner.
My credit rating will never be the same again
There is a misconception that financial missteps remain on your credit report indefinitely. Thankfully, this isn’t the case. Just as it is possible to destroy a good credit rating, it is entirely possible to completely turn a bad credit rating around. Any financial decision only remains on your credit report for six years. As most IVAs last for six years, upon completion of your IVA, it will disappear from your credit report and you can begin to build up good credit.
My employers will find out about my IVA
This isn’t something that should cause you any concern at all. Current employers are unlikely to discover your IVA unless you authorise them to perform a credit check or they specifically search for your name on an IVA register. There is no reason why this should happen. If you are applying for a new job, the chances are higher, but it is unlikely that this will affect your likelihood of employment unless you are applying for a position that puts you in charge of money or other people’s finances.
I’ll lose my car and ability to get around
Like the possibility of losing your home, this myth makes no logical sense. Your creditors want you to be able to get to your job, so they have no reason for wanting to deprive you of your means of transportation. That being said, if you are driving around in a luxury car, or one that is worth a substantial amount of money, you might be asked to downgrade. This is a small price to pay when you consider the alternative of bankruptcy.
Is an IVA right for me?
An Insolvency Practitioner has access to debt management software that is carefully crafted and designed to take into account your personal circumstances, and calculate whether or not your given situation would be ideal for an IVA. The Insolvency Practitioner has years of experience with insolvency, and they will take into account your incomings, outgoings, dependents, and total debt to make their decision. They are duty bound to recommend a course of action that is best for you and your financial future.