The Most Common IVA Mistakes (And How to Avoid Them)

An Individual Voluntary Arrangement (IVA) is a powerful tool to help UK citizens manage debt and work toward financial freedom. However, successfully completing an IVA requires careful management and an understanding of the common pitfalls that can derail your progress.

We’ve seen how avoidable mistakes can lead to unnecessary stress and even IVA failure. This blog post highlights the most common IVA mistakes and how you can avoid them to ensure a smooth journey toward becoming debt-free.

1. Failing to Provide Accurate Financial Information

When setting up an Individual Voluntary Arrangement (IVA), your insolvency practitioner (IP) relies on the Financial Information you provide to create a repayment plan. If this information is incomplete or inaccurate, it can lead to problems down the line.

How to Avoid It:

• Be thorough and honest when listing your income, expenses, and debts.
• Gather supporting documents like bank statements, payslips, and bills to back up your claims.
• Inform your IP about any irregular income, such as bonuses or overtime.

2. Overlooking Priority Expenses

Some people fail to prioritise essential expenses, such as rent, mortgage, utilities, and council tax, while managing their IVA. Ignoring these commitments can lead to arrears, additional stress, and even legal issues.

How to Avoid It:

• Include all priority expenses in your budget before calculating your IVA contributions.
• Regularly review your finances to ensure these costs are covered.

3. Missing Payments

Missing IVA payments is one of the most serious mistakes you can make. It can lead to the failure of your IVA, leaving you vulnerable to creditor actions.

How to Avoid It:

• Set up a direct debit or standing order to ensure timely payments.
• Create a budget that leaves room for unexpected expenses.
• If you’re unable to make a payment due to unforeseen circumstances, contact your insolvency practitioner (IP) immediately to discuss your options.

4. Taking on New Debt

Borrowing money during an IVA is usually prohibited and can breach the terms of your agreement. This mistake can worsen your financial situation and jeopardise your IVA.

How to Avoid It:

• Avoid using credit cards, payday loans, or borrowing from friends and family.
• Stick to the budget agreed upon in your IVA plan.
• Speak to your IP if you’re facing unexpected expenses, as they may be able to adjust your payments temporarily.

5. Not Communicating with Your Insolvency Practitioner

Your insolvency practitioner (IP) is there to support you throughout the IVA process. However, some people fail to communicate changes in their financial situation, such as a change in income, increased expenses, or receiving a windfall.

How to Avoid It:

• Keep your IP informed about any changes to your financial circumstances as soon as they happen.
• Be proactive in asking for advice or clarification if you’re unsure about any aspect of your IVA.

6. Ignoring the IVA Terms

Every Individual Voluntary Arrangement (IVA) has specific terms and conditions that must be adhered to. Ignoring these terms—whether intentionally or unintentionally—can lead to breaches and even the termination of your agreement.

How to Avoid It:

• Read your IVA agreement carefully and ensure you understand your obligations.
• Ask your IP to explain anything you’re unsure about.
• Follow all restrictions, including limits on borrowing and requirements for reporting financial changes.

7. Failing to Account for Irregular Expenses

Unplanned expenses, such as car repairs or medical bills, can disrupt your budget and make it difficult to meet IVA payments.

How to Avoid It:

• Build a small emergency fund to cover irregular expenses.
• Budget for occasional costs, like Christmas gifts or school uniforms, to avoid financial surprises.

8. Neglecting to Monitor Your Progress

Many people set up their IVA and then fail to monitor their financial progress. This can lead to missed opportunities to adjust their budget or improve their financial habits.

How to Avoid It:

• Regularly review your income, expenses, and IVA payments to ensure you’re on track.
• Keep a record of any correspondence with your IP and creditors.
• Use your IVA as an opportunity to develop better financial management skills.

9. Assuming All Debts Are Included

Not all debts can be included in an IVA, and some individuals mistakenly believe they are completely free of all financial obligations after entering into an IVA.

How to Avoid It:

• Confirm with your IP which debts are included in your IVA. Typically, unsecured debts like credit cards and personal loans are covered, but secured debts, student loans, and court fines are not.
• Continue paying any excluded debts separately.

10. Expecting Instant Financial Freedom

An IVA is a long-term commitment, usually lasting five to six years. Some people become discouraged when they don’t see immediate results, leading to impatience or poor decision-making.

How to Avoid It:

• Stay focused on the long-term goal of becoming debt-free.
• Celebrate small milestones, such as completing a year of payments.
• Remember that completing your IVA will provide a fresh financial start.

How We Can Help You Avoid IVA Mistakes

At our firm, we specialise in guiding UK citizens through the IVA process and helping them avoid common mistakes. Here’s how we can support you:

• Personalised Guidance: We’ll ensure you fully understand your IVA agreement and obligations.
• Ongoing Support: Our team will provide advice and assistance throughout your IVA, helping you navigate any challenges.
• Proactive Solutions: We’ll work with you to adjust your repayment plan if your circumstances change.

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