IVA help ‘needs to be considered carefully’

Those considering an individual voluntary arrangement (IVA) as a means of getting out of severe debt need to be aware of the implications involved in this, an expert has advised.

Director of external affairs at credit reference agency Equifax Neil Munroe said both IVAs and bankruptcy carry a mark on credit files for six years., which may make potential future lenders wary.

He added: "It doesn't mean that you have to wait six years, if you can show you've rehabilitated yourself after those events, that will start to weigh in your favour – but it will restrict your access to credit for a period of time."

Mr Munroe also warned that both actions can lead to certain jobs being closed to those with these marks on their files, such as those involving finance.

For these reasons, people should not undertake either option "lightly" or consider because they could be discharged in 12 months that these offer "easy" ways out of debt, the expert commented.

Those who do take out IVAs may do so because they are in an unpayable debt situation but wish to try to make some payments, rather than having it all wiped out by bankruptcy.

One benefit of an IVA over bankruptcy is that while the latter is a judgement that can be reported in the local press and is automatically published in the weekly London Gazette, an IVA is a confidential deal, so social stigma can be avoided.

Insolvency Service figures have revealed IVAs to be the more popular of the two options in two of the last three quarters.

Posted by Paul Thacker