IVA or Individual Voluntary Arrangement is a legally binding agreement between an individual and their creditors. It provides an opportunity for individuals to pay off their debts in an affordable way by making a single affordable payment each month. The primary purpose of IVA is to help individuals who are struggling with their debts avoid being declared bankrupt. In this article, we will give you a comprehensive guide on everything you need to know about IVA.
How does IVA work?
When an individual enters into an IVA, they make a proposal to their creditors with the help of an insolvency practitioner (IP). The proposal highlights the individual’s debt situation and proposes a payment plan that the individual can afford. Once the proposal is accepted and agreed upon by the creditors, a legally binding agreement is created.
The individual then makes a single monthly payment to the IP, who then distributes this payment amongst the creditors. The payment amount is usually lower than the total amount of debt owed. IVA typically lasts for 5 to 6 years, during which time the individual must make regular payments. After the agreed-upon period, any remaining debt is written off.
Advantages of IVA
IVA has several advantages, some of which include:
– Affordable monthly payments: The monthly payment for IVA is usually lower than the total amount of debt owed.
– Protection from legal action: Once an IVA is set up, creditors cannot take any legal action against the individual.
– Flexibility: IVA provides flexibility for individuals to make affordable payments without having to sell their assets.
– Write off remaining debt: After the agreed-upon period, any remaining debt is written off.
Disadvantages of IVA
IVA also has some disadvantages, which include:
– Credit rating: Entering an IVA can negatively impact an individual’s credit rating.
– Expensive: IVAs can be costly, and individuals may have to pay fees to the insolvency practitioner.
– Failure to complete: If an individual fails to make regular payments, the IVA may fail, and creditors may take legal action.
Who is eligible for IVA?
Only individuals who owe a qualifying amount of debt and can afford to make regular payments can apply for IVA. The individual must also have a regular source of income, and their total debt should not exceed their total assets.
Conclusion
IVA is an excellent solution for individuals who are struggling with their debts and want to avoid declaring bankruptcy. It provides an opportunity for individuals to make affordable payments over a set period, after which any remaining debt is written off. Before considering IVA, individuals should seek expert advice from an insolvency practitioner to understand if it is the best solution for them.
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