Individual voluntary arrangements – everything you need to know

By • Apr 30th, 2013 • Category: Bankruptcy

An individual voluntary agreement, also known as an IVA, is an alternative to bankruptcy that some people pursue when they are crippled by debt and can find no way out. An IVA is beneficial to people in certain circumstances, but if you need to know more, then let’s examine it in more detail.

What is an IVA?

An IVA is a formal agreement between you and your creditors which allows you to pay back your debts over an agreed period of time. Sometimes you are required to pay back all of your debt in an IVA but often the agreement is that you will repay a reduced amount to your creditors. They may agree to such an agreement so that they get some money back, rather than nothing if you filed for bankruptcy.

IVAs are not available for everyone and they depend on your circumstances. They are only suitable for people who have some spare funds each month with which to make repayments. You must also owe more than two creditors money and you must be unable to adhere to the original repayment agreement you had with them.

IVAs cover various types of debt, including:

  • Bank and building society loans and overdrafts

  • Credit cards

  • Personal loans

  • Store cards

  • Catalogues

  • Charge cards

  • Council tax arrears

  • Tax debts

  • Electricity and gas debts.

When is an IVA the right option?

It is important to remember that IVAs are not always the right option. An IVA is simply one option, although it could be the best way for you to work your way out of debt.

If it is available to you , an individual voluntary arrangement may be preferable option to bankruptcy. If your financial problems are temporary then it may be the right option for you. An IVA has a number of benefits compared to bankruptcy. You can save your assets and possessions if you choose an IVA over bankruptcy, and it should be remembered that bankruptcy can lead to serious problems acquiring finance in the future.

How does it work?

To arrange an IVA you will need to contact a registered insolvency practitioner to act on your behalf. There are a number of companies offering IVA services and a quick internet search will produce a list to choose from.

Your practitioner will help you come up with a sensible and doable plan to repay your debts and come to an agreement with your creditors as to how much you will repay and over what period of time. This is usually a term of five years.

If necessary, an insolvency practitioner can also arrange an interim order which prevents your creditors taking legal action against you while your proposal is being prepared.

So consider your position and whether an IVA could be the best option for you.

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