How to Spot IVA Companies to Avoid – Don’t Get Trapped

What do you need to know to spot the IVA companies to avoid? 

Whether you’re considering an IVA against other solutions or already aware that an IVA is the best debt solution for you, it’s good to know what IVA companies to keep at arm’s length. I’ll be revealing the industry must-knows below. 

How to get out of debt

There are different ways to get out of debt depending on the debts you have and your personal situation. I have discussed the different avenues out of debt on my aptly named How to Get Out of Debt page. But it’s best to get personalised advice from a debt charity like Step Change. 

One of the methods available is an Individual Voluntary Arrangement (IVA), which could be an option if you have multiple unsecured debts that you would struggle to fully repay as agreed over many years. 

Let’s learn more…

Do you have to pay?

There are ways to have debt written off in the UK.

If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need. 

If you want to find out whether you qualify for having debt written off or payments lowered then fill out the short form below.

What is an IVA and how do they work?

An IVA is a type of debt solution that is typically used by working people who have multiple unsecured debts they’re struggling to repay or won’t repay in a reasonable time. 

If creditors agree to your IVA proposal even the ones that rejected the proposal will be forced into the agreement with everyone else. The proposal will include monthly repayments that last for five years, i.e. 60 repayments. 

Each monthly repayment is deducted with fees (more on this later) and then split between all creditors based on how much you owe each of them. For example, if you owed a single creditor 75% of the total debt, this creditor would take 75% of each monthly payment unless otherwise agreed. 

At the end of the 60 repayments, the debtor can end the IVA agreement if they either:

1. Release equity from a property they own and pay the lump sum into the IVA.
2. Ask a friend or family member to make a specified lump sum payment into the IVA.

If either of the above is possible, the IVA will end and any remaining debt owed to any creditor is instantly written off. 

In cases where a debtor cannot release equity or ask a third party to contribute a lump sum, they will be forced to extend the IVA for one more year, equalling 12 more repayments. Only at the end of the additional year will the IVA end and any outstanding debt is written off. 

What are the benefits of an IVA?

The main benefits of using an IVA are:

1. Your IVA repayments are tailored to what’s deemed affordable to you and can often be adjusted in line with changes to financial circumstances.

2. You’ll be able to keep your home, even if you later have to release some equity through a loan.

3. Ongoing IVA fees are taken from monthly repayments, so you don’t pay extra

4. Once the IVA ends any outstanding debt is written off, which could save you thousands of pounds.

Can you lower your repayments?

If you’re struggling to pay back your debt, then you might qualify for a debt solution.

Some solutions lower your monthly payments while others write off a portion of your debt. 

To find out whether they could work in your situation, hit the button below.

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What are the bad sides of an IVA?

The drawbacks of using an IVA are:

1. Creditors aren’t forced to agree to an IVA.

2. If the IVA fails you can be pursued and even made bankrupt.

3. You may have to release equity from your home through a loan and then pay interest on the secured loan.

4. An IVA damages your credit rating.

5. You will have to live under IVA restrictions, including restrictions on your day-to-day spending.

Can I go on holiday with an IVA?

There’s no legal restriction stopping you from going on holiday while using an IVA but saving up enough money to afford a holiday while under IVA restrictions can be difficult. 

IVA repayments are calculated based on your disposable income, so there will be limited ways to save money for a holiday. But there is an additional income threshold – usually 10% – that could help you save.

The additional income threshold allows IVA users to earn 10% of their regular income extra through bonuses, commission or overtime and be allowed to keep this money. Saving these additional payments for many weeks or months may enable them to afford a holiday. 

Another option is if someone else pays for you to go on holiday. As long as another person has paid for you and you haven’t been hiding money, you will be allowed to go on holiday without any issues. 

Will I fail a credit check with an IVA?

An IVA damages your credit report, which is likely to have already been damaged due to missed debt repayments prior to the IVA. This makes it extremely difficult to get credit once the IVA has ended. You’ll probably need to wait to build up your credit score before applying for credit after an IVA.

Interestingly, IVA restrictions don’t stop you from taking out a loan or other credit of up to £500 when you’re on an IVA. You don’t usually need permission to take out credit of these amounts with an IVA. But it’s extremely difficult to get your credit application approved. Most lenders refuse to lend money to people on an IVA. 

How do you get an IVA?

To get an IVA you must contact a qualified Insolvency Practitioner. Only these people can make IVA proposals to your creditors on your behalf and officially set up an IVA. It’s not something you can do yourself by speaking with creditors directly. 

Your insolvency practitioner will come up with an IVA proposal to all your applicable creditors, such as unsecured lenders. The proposal is calculated based on your income and essential expenses, ensuring that you pay as much of your disposable income into the IVA each month as you possibly can. 

The IVA proposal is put in front of creditors at a creditor meeting, which these days takes place remotely. The creditors must vote on the IVA proposal and if 75% of creditors vote yes or if creditors that are owed 75% of the total debt vote yes, then the IVA becomes accepted. 

Note, all creditors are included in the IVA when it’s accepted, even the ones that may have voted against it. 

The IVA will then be set up and managed by the IVA insolvency practitioner for its lifetime, which is usually five or six years. These people work in debt management companies, also called IVA companies. 

You’ll pay initial and ongoing fees for their IVA services, but as mentioned earlier, these fees are deducted from IVA monthly payments rather than paid as an extra.

How to spot the IVA companies to avoid

Source: https://forums.moneysavingexpert.com/discussion/448657/which-iva-company 

There are several red flags you need to look for during your IVA company search, including:

#1: Big promises

Be sceptical but not totally dismissive of IVA companies making a bold claim. An example of a bold claim is “We can reduce your debt by 90%”. Even an IVA is unlikely to write off 90% of your debt considering you’ll be making repayments for five or six years. If you have any concerns about claims they’re making, ask them directly to back it up and see how they respond. 

#2: High IVA failure rates

If an IVA fails it could be the debtor’s fault but the IVA company may not be totally innocent in the events that caused the IVA to fail. Around 15% of IVAs fail so you should check to see how this figure compares with the IVA company you’re considering. They should tell you their failure rate but if they don’t this is a red flag in itself as they’re not being transparent.

#3: Poor reviews

IVA companies often receive scores of reviews, usually from people who have had success with the IVA company helping them out of debt. You should check third-party hosted reviews such as Trustpilot to see how they’re fairing. 

If they have a string of bad reviews, make sure you read them to see if the IVA company is really to blame. Some reviews can be unfair and emotionally charged. 

#4: Not offering free and good advice

Another red flag is when the IVA company charges a fee for their initial advice. The company should be providing free debt advice to assess your suitability for their services. They shouldn’t be charging unrealistic fees for this and most do offer it for free.

Another cause for concern whilst you receive advice is if the adviser doesn’t assess your situation against other debt solutions, such as a Debt Relief Order, Debt Management Plan or even bankruptcy. 

Sometimes, companies won’t consider alternatives because they don’t offer services in this area, and consequently, it’s not profitable for them to point you in these directions. But FCA rules state that financial service companies must always provide advice that is best for you!

#5: They rush or pressure you to make decisions

After you’ve received advice, the IVA company may follow up to see how you have considered the IVA as an option. This is entirely fine, but the IVA company mustn’t rush you or pressure you into any of their services. Doing so shows that they’re more interested in getting your money rather than doing what’s best for you.

Which IVA company is best?

I don’t believe there is one IVA company that’s better than the rest. There are a handful of fantastic debt management companies with great company values and services to help debtors consider an IVA debt solution.

The best IVA company may be situational and based on preferences. It won’t always be based on price but this will be a main consideration for debtors. It’s worth doing your research to find the best IVA company for you and keep in mind the ways to spot the IVA companies to avoid at the same time. 

Should I get an IVA?

The best way to know if an IVA is right for you is to get free debt advice. You can get debt advice from IVA companies directly, but as these businesses are commercially motivated, you may choose to get free debt advice from a debt charity instead.

Step Change offers free and confidential debt advice, and they can even help you arrange many debt solutions for free. They cannot put you in touch with an IVA company that works for free, but they can refer you to their recommended IVA partners who can take over your case. 

As these companies have been recommended by Step Change, you’re likely to receive a safe and good service. But this doesn’t mean you should ignore other options as well.  

“It will only get worse” 😩

It’s cliché to say, but with debt it’s true; the longer you leave it, the worse the problem gets. 

There are straightforward and effective ways to deal with debt, but you have to know your options. 

Fill out the short form to find out about the debt solutions that could reduce your monthly payments or even write off some of your debt.

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How do you complain about an IVA company?

To complain about an IVA company you must first direct your complaint to the insolvency practitioner and then get a copy of your complaint. If matters aren’t resolved you can complain to the Insolvency Service. 

If you wish to complain about the advice you received, such as being misled or pressured, you can complain to the Financial Conduct Authority (FCA) instead.