Individual Voluntary Arrangement (IVA) Overview
Individual Voluntary Arrangement is a legally-binding arrangement between you and your creditors writing off up to 90% of your debts. It means reaching a compromise with your creditors to settle your debts within a reasonable and fixed period of time at the same time avoid the consequences of bankruptcy. An individual who is intending to propose an IVA can apply for an Interim Order, the interim order basically prevents all creditors from pursuing any legal proceedings against you. If legal proceedings have been commenced, then they are frozen at the stage they have reached. Read more...
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What are the advantages of IVA?
Affordable - It involves the debtor repaying an affordable monthly repayment, based on what they can reasonable pay after essential expenses are taken into account.
Stability - As the repayments made are calculated after essential expenses are accounted for, there is no danger of not being able to pay the essential bills or buy food for the week. Unless there is a significant change in financial circumstances, the repayments should always remain the same.
Less Stress - As it is a legally binding agreement, once it has begun, creditors can no longer chase the debtor for outstanding money (provided the repayments are being kept.)This means there will be no more phone calls or visits from debt collectors.
Financial freedom - By being able to budget for the IVA, it allows greater financial control, as well as complete debt freedom once it is successfully completed.
Security - One of the key benefits, unlike bankruptcy, is that the individual should not have to sell their home. This is because any mortgage repayments are included in the essential expenditure calculations.
What are the disadvantages of IVA?
Legally Binding Agreement - As it is legally binding, should the debtor break any of the terms (such as not keeping up with the repayments), the IVA will fail, and the creditors may petition for bankruptcy.
Duration - Unlike Bankruptcy, which usually lasts for only 12 months, an IVA often lasts for 5-6 years, although any outstanding debt after this time will usually be cleared.
Re-mortgage - While an individual will generally not be required to sell their home, they may be expected to re-mortgage in order to release equity. This would normally be expected to occur within the last year of the arrangement.
Credit record - As with Bankruptcy, an IVA will be recorded on an individual's credit record for a period of 6 years. This is from the start of the IVA, so even if it only lasts for 5 years, there will still be a period where it could affect the ability to get further credit. It is also worth noting that during an IVA, any application for credit must first be approved by the IVA supervisor. If it isn't, then it would be considered a breach of the 'contract' and the IVA will fail.