Like bankruptcy, an IVA is a form of insolvency and entering into an IVA should not be taken lightly. Although it is a way to write off debts that you are unable to repay within a reasonable time frame, there are a number of serious consequences.

The first is that you will effectively lose your credit rating for six years, and it will be illegal for you to borrow a significant sum of money during the period that your IVA is in existence which in most circumstances is five years.

An IVA is a formal arrangement which means that you must keep up the agreed level of repayments. Although you will be able to write off any outstanding debts at the end of the five year period, you must continue to repay what is judged to be an affordable amount every month for, in most cases, five years.

A further downside is if you have any equity in your home. Unlike a normal bankruptcy, with an IVA you are extremely unlikely to lose your home in order to repay your creditors, however there is more too it than that.

At the end of the five year period it is quite likely that any equity you have in your home will be used to help repay some of the outstanding debts. This can be particularly punitive if during the period of your IVA there is a significant rise in house prices. The money that you might have accumulated through a boom in the housing market will be taken away from you.

The process of creating an IVA is complex and is not something that an individual is able to do alone. In fact it is only possible to set up an IVA through a qualified and certified practitioner. Anybody who is considering that an IVA might be a way out of their debt problem should first of all take some professional IVA advice.

In most cases IVA advice is available free from a number of organisations and you will find that such organisations will also be able to offer help on a range of alternative ways that might be available to you in order to make you debt free.