How Does An IVA Compare To Bankruptcy?

The Individual Voluntary Agreement (or IVA) is a system in place to help debt-relief to individuals in the UK whom do not wish to pursue the more dramatic route of bankruptcy. An IVA is a formal agreement between the debtor and creditors. However, even though it is not quite the step that bankruptcy is, there still exists, a number of advantages and disadvantages that need to be looked at before this step is taken.

One advantage is that the any financial data regarding the IVA and the applicant is kept out of reach of the public; as opposed to bankruptcy where it is often considered newsworthy. Creditors would still see a risk when evaluating an individual with an IVA as it is right there on the credit report but the agreement is strictly between the individual and the creditors.

An IVA, as with a bankruptcy, does appear on a credit report but therein also lies an advantage in that any prospective creditor can see that there is a willingness to pay back any monies owed. With bankruptcy, the individual has made a formal declaration that the debt cannot be paid.

A rather important advantage that an IVA has over bankruptcy is that the borrower is still in control over their home. If declared bankrupt, they lose that control and they can even find that their home is sold to pay monies owed to their creditors.

A disadvantage is one that has already been mentioned and that is the fact that it does appear on your credit report. It won’t be there forever, however, and in fact for only a short duration. But it will be there nonetheless. However, it should be remembered that if you are in such debt that your credit report won’t be in perfect condition anyway so this may not be the issue that it often perceived to be, in this instance. And if you don’t do anything to improve your situation, it is likely that your report will begin to receive bad mark after bad mark, ultimately resulting in one that won’t necessarily be healthier than with an IVA attached to it.

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