Using IVA-Individual Voluntary Arrangements, consumers can free themselves from debt within just five years.
By developing an IVA with creditors, people repay a portion of their debt and prevent additional interest and other charges from being added to money owed during this period.
Individuals who would like to avoid the negative aspects of bankruptcy often consider this alternative.
Debt management experts provide consumers with assistance in arranging an IVA.
Defining IVA-Individual Voluntary Arrangements
An IVA is a formal agreement, developed with creditors, to repay a percentage of debts during a fixed timeframe. The creditor agrees to write off a certain amount of the debt owed.
The debtor agrees to provide a fixed amount of income to repay the remaining debt. This arrangement typically lasts for a period of five years. During this time, no additional interest or other charges accrue on the debts, freezing the total amount owed.
Individuals, partners, and sole traders who have unsecured debts of approximately £15,000 and are having problems making contractual payments to these creditors are eligible for an IVA.
Stable income and cash remaining after paying basic living expenses are also required. With one type of arrangement, called a protocol IVA, the person must also have a minimum of three lines of debt to at least two creditors.
Fees involved in the IVA process vary depending on the amount of debt. These charges are often included in the monthly payments under the arrangement.
An Insolvency Practitioner is responsible for processing the IVA paperwork and serving as the Supervisor of the plan. All unsecured creditors are eligible for inclusion in IVA-Individual Voluntary Arrangements.
The monthly payment amount is based on the ability of the consumer to pay. Successful completion of the IVA results in debts being written off, offering a fresh start to the individual.
Reasons To Enter An IVA
Individuals in debt select an IVA as their preferred debt management solution for many reasons. Having a portion of the debt written off is attractive to consumers who owe a substantial amount of money.
The legal protection from accrual of additional interest and charges is also appealing. People who have borrowed more than they can afford to repay find Individual Voluntary Arrangements more attractive than filing for bankruptcy because there are fewer negative aspects.
Some people cannot go bankrupt due to their job. For them, an IVA may be a suitable alternative. This arrangement does not affect the ability to serve as a company director, hold public office, or have a career in the Armed Forces or on the Police Force.
Unlike a bankruptcy, an IVA is not published in a local newspaper. This arrangement serves as a discreet way to handle a difficult financial situation. In most cases, the occupation of the individual will be unaffected and no one will be aware of the arrangement.
By adhering to the IVA terms, the individual is protected from additional legal action from creditors. The person will also stop receiving letters or telephone calls from creditors.
The ability to retain more control over assets handling under an IVA provides many people with peace of mind. Typical assets remain under their ownership, not subject to seizure as with a bankruptcy.
Disadvantages To IVA-Individual Voluntary Arrangements
Positive aspects of an IVA aside, there are drawbacks to this financial arrangement. The individual must adhere to the financial plan for the entire term of the IVA.
Default could cause the IVA to fail, leading to bankruptcy of the individual. Every asset and liability must be declared when developing this plan. Assets that feature excessive value may be subject to release in order to repay creditors
A bonus, inheritance, or winnings must be declared and included as assets under the arrangement.
During the final six months of the Individual Voluntary Arrangement, the individual will be requested to release a portion of equity from his or her property.
Though the IVA is not published in a newspaper, it is added to the public register. This increases the chances of it appearing on the credit file, which can limit additional credit offered during the arrangement period.
However, repaying the debt should be the primary focus during this time, not obtaining new credit.
An IVA does not feature guaranteed acceptance. More than 75 percent of the creditors, measured by value, must vote in favor of the arrangement.
The decision to approve the IVA is based on whether the arrangement will offer a higher return to creditors than would bankruptcy. Asset value, debt level, proposed monthly payment amount, age of debt, and reason for the debt can influence the decision.
Each creditor may require an IVA proposal to meet different criteria in order to grant approval. Once an IVA is approved, creditors expect the individual to be committed to repayment.
Gifts, vacations, entertainment expenses, spa treatments, fitness club memberships, and even savings accounts are not considered acceptable expenses.
Debts Included In IVA-Individual Voluntary Arrangements
Various types of debts may be included in an Individual Voluntary Arrangement.
Among them are: store or credit cards, bank accounts, loans from finance companies, outstanding Inland Revenue debts and VAT, loans from family members or friends, and any outstanding shortfall payments for goods obtained through a hire purchase agreement but no longer possessed by the individual.
Contractual payments for secured and priority debts must continue to be made.
Other debts not subject to inclusion in an IVA are: mortgages, hire purchase agreements aside from shortfalls, loans secured by property, CSA or Maintenance arrears, Magistrates Court fines, parking tickets or speeding tickets, arrears for a rented property, and debts realized through fraudulent actions.
An allowance for secured and priority debts is included in the IVA expense schedule.
Getting IVA-Individual Voluntary Arrangements
Individuals cannot arrange IVA-Individual Voluntary Arrangements directly with creditors. A licensed Insolvency Practitioner is required to make the arrangement.
This individual will prepare the paperwork, supervise, and review the IVA during the entire term of its existence. Consumers should take care when selecting an Insolvency Practitioner, choosing one that has a wealth of experience.