Applying For An Individual Voluntary Arrangement
Depending on your circumstances, and Individual Voluntary Arrangement, or IVA, could be the best solution to your debt and keep you from bankruptcy. IVA’s have many advantages for a debtor, but there are disadvantages as well which can be hindering, so it is best to research all possible debt solutions.
You must owe at least 15,000 in unsecured debt to qualify for an IVA. Additionally, you must have a regular income that allows you to make monthly payments toward your debt, after all your other monthly bills have been paid. If you can’t afford a monthly payment, you may have to enter into bankruptcy. An IVA will become a legal agreement between you and your creditors, set up by an insolvency practitioner, giving you up to five years to repay your debt.
With an IVA, your insolvency practitioner meets with your creditors and presents them with a plan of repayment. The creditors will usually agree to plan to reduce your debt to pence per pound, sometimes up to 75% less than the original debt. At least 3/4 of your creditors must agree to accept the plan for it to become legal. If they don’t, the practitioner must amend the terms until an agreement is reached. Once it is approved, you pay a monthly sum that is split between the creditors. Part of the insolvency practitioner’s fees will come from that monthly sum.
To a debtor, an IVA’s advantages can be great. Unlike bankruptcy, those in an IVA do not risk losing their home. Your debt is usually reduced by a large amount, you pay no interest fees, get no calls from creditors, and the fees charged by the insolvency practitioner are usually less than the fees you would pay in bankruptcy. Payments you make toward your debt are income based, and can fluctuate with your income. Although both a bankruptcy and an IVA stay on your credit report for six years, an IVA looks better to future creditors and carries fewer stigmas. During an IVA, you are allowed to apply for credit.
The disadvantages are that setting up and IVA through an insolvency practitioner is expensive, and other than bankruptcy, most other forms of debt solution cost less. Having your finances closely scrutinized for such a long period can also be difficult. Any extra income that comes your way will have to go toward your payments, including employment bonuses, tax repayment, and any inheritance. You will find yourself having to explain any unusual financial activity to your insolvency practitioner. If you fail the agreement, your only option may be bankruptcy.
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