What is an IVA?

IVA stands for Individual Voluntary Agreement. It is a formal agreement with your creditors which allows you to pay back just a percentage of your debt. With an IVA as much as 75% of your debt can be written off. IVA was introduced as a part of the Insolvency Act of 1986 and necessitates a debt of at least £15,000 owed to three or more creditors. You only have to deal with one affordable monthly payment or in some cases a lump sum. Since an IVA is legally binding your creditors cannot change the IVA terms and conditions once they have agreed to it. Also they cannot threaten any legal action against you as long as you maintain your monthly repayments. An Insolvency Practitioner helps to formulate your IVA.

The IVA Process:

•Your appointed Insolvency Practitioner (IP) will prepare an IVA proposal

•IP will file an Interim Order in the Court to prevent any legal action against you

•Your creditors will meet to accept/reject the IVA proposal

•If 75% of the creditors vote in favor of the terms, then the IVA comes into being

Why should you choose an IVA over Bankruptcy?

•No negative publicity/stigma/restrictions to deal with

•IVA does not affect your professional status

•You can operate a bank account (it should not have an overdraft facility)

•No fees or legal proceedings

•You don't lose your home/property

The IVA Advantage:

•Up to 75% of your debt is written off

•Overall debt is reduced

•Fixed/Legally binding agreement

•Deal with one affordable and easy to manage monthly payment

•Interest on loans is frozen

•Get rid of creditor harassment

•Legal proceedings are stopped

•Repaired credit rating

•Become debt free in 5 years or less

Does that mean that an IVA has no disadvantages? Not necessarily. An IVA might require you to release some or all the equity that you have tied up in your property. Also you qualify for an IVA only if your total unsecured debt is more than £15,000 and if you can afford a monthly payment of £200. When you have availed an IVA you will not be able to use any of your credit cards or store cards. You will not be allowed to borrow any more money until you have cleared your debt.

IVA is becoming an increasingly popular option when compared to debt management program or bankruptcy. Various debt solutions might reduce your repayments to a great extent but they leave you with a large part of your debt to pay back. These debt solutions are not legally binding either. When compared to the various debt solutions an IVA is an ideal solution for both the debtor and the creditor.
 

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