On Tuesday Jan 30^th 2007, the Financial Times quoted Adam Applegarth, Northern Rock’s chief executive as saying that in 9 out of 10 cases, IVAs are not in the best interests of consumers as credit ratings will be ruined.

I find this a very strange comment. My reason is that the only people who can go into an IVA are those who are truly insolvent. By very definition, someone who is insolvent is not in a position to repay their debt. If you can not repay your debt, then you only have three choices, do nothing, continue to borrow and make matters worse or deal with your debt head on using either a Debt Management Plan (DMP), IVA or Bankruptcy procedure.

Clearly doing nothing will not solve the problem. Equally, best advise is NOT to continue borrowing. If you already know that you can not afford to repay what you owe, then you should certainly not be borrowing more! As such, you are going to have to use one of the three debt solutions DMP, IVA or Bankruptcy . It is a simple fact that using ANY of these solutions will ruin your credit rating. For example:

Debt Management Plan – Creditors will issue default notices against you which will be recorded on your credit file. These will prevent you from borrowing until the account is settled in full which may take many years.

IVA & Bankruptcy – A notice of the procedure will be added to your account which will prevent you from borrowing until the procedure is completed and the debts satisfied. The notice will remain on your file for 6 years. 

Given the above, I believe it is totally wrong to infer that undertaking an IVA will make your credit rating any worse than any of the other options open to you if you are insolvent.

Note, please see my blog of the 23^rd Jan 07 for more info about what happens to your credit rating post IVA

This entry was posted on Wednesday, January 31st, 2007 at 7:36 pm and is filed under IVA. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.