Individual Voluntary Arrangements (IVAs) were implemented by the government to assist people with debt and give them an alternative to Bankruptcy. An Individual Voluntary Arrangement is the more preferred choice to Bankruptcy for the parties involved, the Creditors and yourself.

IVAs are available to those citizens of England, Wales and Northern Ireland. If your combined debt is over £15,000 and you are unable to afford your current repayment option an IVA is a choice for you.

FAQ 1 - How an IVA works?

There are steps involved in implementing this debt solution; these steps are relatively simple if you have the right tools. Below we will describe six basic steps to starting your Individual Voluntary Arrangement from beginning to end.

  • Contact a qualified Debt Advisor; they will assist you with assessing your income and monthly expenses. They will also make sure that your vital bills are paid first, such as your mortgage or taxes.
    During the course of your IVA you will only be required to pay only what you can afford.
  • Provide your Creditors with the necessary application form, a copy of your pay stubs as well as a compilation of your debts.
  • Your Insolvency Practitioner will now confirm all of the numbers and begin drawing up your IVA contract. At this time they will also contact your Creditors explaining to them your situation and your plans to initiate into an IVA. After this contact is made probably your continued calls and letters from Creditors will stop.
  • The IP has now completed your IVA proposal as well as a nomination letter as to why they believe you qualify for an IVA. At this time a date is set up where you will meet with your IP and your Creditors.
  • Because the use of IVA’s has become a popular choice for debt relief an actual physical meeting does not typically take place, rather each creditor will fax in their vote. You must have a positive vote from 75% of your Creditors in order for your IVA to be approved.
  • With the use of a qualified and licensed Insolvency Practitioner this process will run quite smoothly at little inconvenience to you.
    A typical IVA can be set up in six weeks. The IVA will last around five years at the end of which any remaining debt will be wiped clean. Dept of up to 75% can be written off; the average amount is usually around 60%.

Too Good to be True?

Entering into and Individual Voluntary Arrangement has so many positive aspects that it may come off as being too good to be true. This is not the case; although the benefits of an IVA are outstanding there are issues that you must consider before entering into such an agreement.

Not everyone will qualify for an IVA. Those persons with a lot of equity in their homes are typically not approved. A Creditor will evaluate what course of action will yield them the most in return. If the Creditors stand to receive more money from you if you are forced to file for Bankruptcy they will not approve an IVA.

Another issue to consider is that and IVA will remain on your credit making it impossible for you to obtain credit for five years. An IVA is a commitment and focuses on becoming completely debt free. If at any time you do not keep your end of the agreement the Insolvency Practitioner is legally required to declare you bankrupt, however if you find that you are in financial trouble during your IVA term you may contact your Insolvency Practitioner so that they may assist you and keep you from being penalized.

The last issue to consider is that for those of you whose debt is less than £15,000, the likelihood of you being approved for an IVA is low.

IVA FAQS 2 - Advantages

As with any decision there are pros and cons to the choices we make, especially when dealing with your finances.

  • Only pay back a percentage of your debt.
  • Only make monthly payments.
  • The IVA is a legally binding contract; Creditors cannot change their minds.
  • Creditors cannot bring any additional action to you once the IVA is in place.
  • Your bank account is not affected.
  • Your situation is not publicized.
  • Your property is usually safeguarded.

FAQ 3 - Disadvantages

  • IVA’s are meant for those people who can afford to make the necessary payment to the Creditors.
  • The Creditors have to agree to the IVA proposal by a 75% vote.
  • If you fail to make any of your payments the Creditors will take action against you and your Insolvency Practitioner will legally file you for Bankruptcy.
  • An IVA does not come for free, make sure you understand all the costs involved.

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