An Individual Voluntary Arrangement, better known as an IVA, is a legally binding agreement between a debtor and his creditors. It is a viable alternative to personal bankruptcy as both the debtor and creditor will receive a better deal. The key to getting this debt free solution approved is offering the creditor more money than they would receive from bankruptcy.
How to Get Your IVA Approved
The minimum offer that creditors will normally approve an IVA is 25 pence in the pound. At least 75% of creditors, in terms of value, must vote in its favour. All creditors are bound by the agreement if this happens. If this doesn't happen, the agreement will either be revised or the debtor declared bankrupt. As the individual normally faces bankruptcy anyway, there is little to lose.
How Much Does it Cost?
It isn't possible to commence this bankruptcy alternative without the services of a professional insolvency practitioner. The cost does vary considerably, but it is generally about £6000. The cost isn't an up-front charge, it is taken from cumulative monthly contributions paid into this debt free plan by the debtor. Of course, it means that the monthly payment must cover this fee.
Annual Breakdown of Income and Expenditure
A requirement of this debt free solution is that the debtor must provide the Insolvency Practitioner with a full breakdown of income and expenditure. This is used to determine whether more money can be paid into the IVA. On occasion, a meeting of creditors may be called to reduce the repayment so it becomes both affordable and sustainable. Any overtime worked will typically be divided on a 50/50 basis.
An Individual Voluntary Arrangement Prevents Creditor Harassment
An IVA is a legally binding agreement between a creditor and a debtor. Provided the monthly premiums are paid, any creditor harassment is illegal. This means that there won't be any further unwanted creditor contact. If this happens, inform that insolvency practitioner immediately.
An Alternative to Bankruptcy That Protects the Family Home
The majority of debtors pursue an IVA, as opposed to personal bankruptcy, to protect the family home. Declaring bankruptcy will normally result in a house being auctioned and the proceeds of the equity disseminated to creditors on a pro rata basis.
A debtor will normally be expected to get an IVA remortgage at the end of year 4 to raise money towards the agreement. However, this will be based upon affordability as a debt free solution that places a debtor back in the same position they were in before would be futile.
Professional Status
It allows professionals to maintain their job and status. This is critical for those working in finance, accountancy, government and the legal profession. Personal bankruptcy would almost certainly result in instant dismissal.
The IVA and Anonymity
Unlike personal bankruptcy, an IVA isn't printed in the local press or London Gazette. However, the agreement will show on the government insolvency register, but very few people know about this, let alone check it. An alternative to bankruptcy is essentially a private arrangement.
Discharge of Serious Debt
Once 60 monthly payments have been made, the debtor will be discharged from the remainder of their debts and be completely free of debt. The insolvency practitioner will present their client with a certificate of completion. It is the responsibility of the debtor to forward this to all three major credit reference agencies.
IVA vs Bankruptcy Alternative
An Individual Voluntary Arrangement is a debt free solution that offers a number of advantages over personal bankruptcy. However, those with serious debts should consider declaring bankruptcy unless they are a home owner, have gambling debts, are a professional or seek complete anonymity.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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