An Individual Voluntary Arrangement (IVA) can prove to be a very prudent solution to debt problems for a lot of people.
IVA companies play a crucial part in helping you navigate through the entire process and can be the difference in your IVA being successful or failing.
Today, I’ll be looking at how you can spot a bad IVA company and why you should avoid such companies at all costs.
What is an IVA?
An IVA is a formal and legally binding agreement between you and your creditors.
It states that you will make an affordable payment towards your debt each month over the course of an agreed-upon period of time (typically 5 years). After this period has finished, any remaining debt that you have towards your creditors is written off.
IVAs are a great way to take care of your debt as they make sure your assets are protected.
Not to mention that IVAs are extremely flexible. This is because your insolvency practitioner (IP) is responsible to make sure you’re never paying more than what you can afford.
It’s a great solution when it comes to debt management.
LATEST NEWS: The Financial Conduct Authority (FCA) stops five firms guilty of pushing venerable customers towards insolvency.
The FCA has started to clamp down on insolvency practitioners (IVA Companies) following an investigation which illustrated a conflict of interest as the fee that debt solution providers are receiving is too high.
How do IVA Companies Work?
When you opt for an IVA, you have to look for an insolvency practitioner (IP) who is going to handle your case.
An insolvency practitioner (IP) is a person that manages your IVA from start to finish. This includes processes such as setting up your IVA, dealing with your creditors as well as finishing up your IVA once you’ve made your last payments.
An insolvency practitioner could be working independently or they could be part of a company or organisation that offers IVAs and possibly other debt solutions.
An insolvency practitioner plays a crucial role in your IVA as they manage many different aspects of it such as handling your payments and dealing with your creditors.
As you can imagine, you’re going to want an insolvency practitioner that knows what they’re doing and are sympathetic to your situation.
Furthermore, different IVA companies have different fees and charges so it’s important to look up different ones and compare their offers before opting for an IVA with any one company.
UK Personal Debt 2021 Update:
There were 29,291 individual insolvencies in England and Wales in March to May 2021, a fall of 8.6% from 32,047 for the same period in 2020.
(Source: The Money Charity)
How do I Choose an IVA Company for Myself?
Before you opt for any one company, it’s important to get debt advice to determine whether an IVA would even be the right choice for you or not.
Sometimes, IVA companies themselves offer free sessions to determine whether an IVA would be suitable for your situation or not.
You can also get professional debt advice from independent debt charities such as Stepchange and National Debtline.
Once you’ve determined that an Individual Voluntary Arrangement (IVA) is definitely the best debt solution for you, then you can start looking at IVA companies.
When you’re trying to find the best IVA company for yourself, here are some things to look for:
No Upfront Fees
It would be extremely detrimental for you to opt for an IVA company that needs you to pay more in upfront fees.
Always opt for an IVA company that does not charge money for the initial introductory meeting and setup process.
Please note that almost all insolvency practitioners will most likely have ongoing fees but they will be a part of your IVA payments. You will not have to pay those fees separately.
IVA companies which charge you money for the introductory meeting should be avoided at all costs.
Reputation and Reviews
It’s a great idea to look up reviews online of IVA companies that you’re considering.
Getting an opinion from individuals that have actually used an IVA company’s services can be a great indicator of what your experience will be like if you choose to opt for an IVA with them.
Always try to go for an IVA company that has been operational for a relatively long time and has a majority of positive client reviews under their belt.
While it’s true that a relatively new IVA company with fewer reviews can provide you with high-quality services, it’s still a risk that you really don’t have to take.
It’s fairly easy to look up online reviews and find the best IVA company for yourself. Thus, you should always do this before you opt to apply for an IVA with any organisation.
Affordable Monthly Payments
Of course, you’re going to want an Individual Voluntary Arrangement where your monthly payments are low and thus, affordable.
One big factor that can end up increasing the amount of money you have to pay in your monthly payments is your IVA company’s fees.
Of course, companies with higher fees will have higher IVA contributions per month than companies with lower fees.
Thus, it’s important for you to look at different IVA companies and choose an IVA company with a lower fee so you don’t have to pay too much every month.
When you’re planning a budget for debt management during your IVA, your insolvency practitioner is going to help you make it. Thus, it’s important to have an IP that is sympathetic towards your situation rather than someone who is only looking to have their fees extorted from you.
IVA Companies to Avoid
When you’re suffering from debt problems, the last thing you need is an issue arising from the debt solution you’ve opted for.
However, this is something that’s far too common.
I often see IVAs fail because debtors are not properly guided by their insolvency practitioners as well as receive complaints from individuals that aren’t happy with the way their IVA company has handled their IVA.
Of course, if you’re already in an IVA and are dealing with an IVA company, you can’t do much about it except for either cancelling your IVA or complaining about your insolvency practitioner.
However, today, I’d like to talk about some telltale signs that you can look out for which will help you avoid such IVA companies.
Make sure that when looking at different insolvency practitioners, you have your eyes peeled for such red flags so you don’t end up in a worse situation than you were in the first place.
Always make sure to beware of IVA companies that make incredulous or unrealistic promises such as “reducing your debt by 90%”.
While it’s true that an IVA can reduce the amount of money you owe, claims such as this one are fairly unrealistic and are an indication that you will be manipulated and lied to throughout the entire process.
Unusually High Rate of Failure
You have the right to inquire about an IVA company’s failure rate.
While it’s true that not every IVA can be successful but if a company’s failure rate is much higher than the average (which is about 15%), then you should avoid that company at all costs.
Of course, this ties into what I mentioned earlier about reviews of IVA companies.
Client reviews are a great resource for getting advice about which company is worth opting for and which one isn’t.
If an IVA company has a majority of negative reviews, you should definitely look towards other companies.
There is a huge number of IVA companies out there so finding the best IVA company for yourself is definitely much harder than it sounds.
The best advice I can give you is to look at as many companies as possible, compare them, look at reviews online and then make your decision.
This is a decision which you definitely should not rush. Take your time.