We consider some of the key myths that surround the Individual Voluntary Arrangement (IVA) debt solution and explain whether there is any truth behind them.

If you are trying to decide how to solve your debt problem one of the solutions you are likely to consider is an IVA. There is a lot of advice available and because of this as you read more and even speak to different people you might come across some information which is simply incorrect.

We look at 5 of the top myths about this debt solution and uncover the truth.

1. If I do an IVA my partner will have to pay for my debts

Unless they are joint named account holders or have given a personal guarantee then no third party can become responsible for paying any of your debts. As such if you decide to start an IVA your spouse or partner cannot be made liable for them.

Having said that if you are living with your partner and they have an income of their own you will normally have to include this in your income and expenditure statement before the Arrangement can be agreed.

This is because they will be expected to contribute to the household expenses according.  If they are also bringing money in you cannot say that you pay for everything from your income alone and therefore artificially reduce the amount you can pay into your Arrangement each month.

2. If my IVA is rejected I will have to go bankrupt

If you propose an IVA word Bankruptcy will normally be mentioned quite often. This is because it is seen as the alternative solution. In fact a comparison to what your creditors would get if you went Bankrupt is actually published in your proposal.

However once you make your application if your creditors decide to reject you will definitely not forced to go Bankrupt. In fact you will not have to do anything if your Arrangement is rejected.

It is down to you to decide what you wan to do next and whether you want to try an alternative debt management solution. In this sense you should certainly not be put off applying by the worry of what might happen if the Arrangement is rejected.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

3. If I do an IVA I will never be able to get a mortgage

One of the key things to understand about IVAs is that your credit rating will be negatively affected.

The fact that you have started the Arrangement will be recorded on your credit file and this will make it more difficult for you to take new credit and especially a new mortgage. However this situation will not last forever.

The record on your credit file will be taken off six years. Your credit rating will then start to repair and your chances of getting a new mortgage will steadily improve although in the short term you may still be restricted to more adverse interest rates.

4. If I do an IVA I will lose my house

Starting an IVA does not mean that your property will be put at risk. In fact the Arrangement will actually protect a your property from further legal actions such as an application for a charging order or even bankruptcy.

In addition your mortgage and any secured loan payments are included in your living expenditure budget before the amount left which you have to pay into the Arrangement is calculated. This means you will always have enough to be able to pay your mortgage and will no longer be at risk getting into arrears because you are trying to pay other debts.

BMD Tip: As a home owner it is important to understand that as part of your Arrangement you will be obliged to release equity from your property to increase the amount paid back to your creditors.

5. Once my IVA is agreed my payments will never change

A standard monthly payment IVA lasts for 5 years. During this time you make a payment each month towards your debt based on your disposable income. This payment is agreed at the beginning of the Arrangement but it is important to understand that it is not cast in stone.

Your payments are subject to change if your financial circumstances change. If your income improves because you get a better job your income and expenses will be reviewed and if you can afford to increase your payments you will have to do so. You will normally have to take 50% of any increase in your disposable income and add this to your normal monthly payment.

Of course if your circumstances do not change through the course of the Arrangement your payments will not change. In addition if your circumstances get worse it is conceivable that your payments could be reduced. However this might not always be possible.