Individual Voluntary Arrangement
Introduction
IVA stands for Individual Voluntary Arrangement which was introduced in 1986 under the Insolvency Act. It’s a legally binding contract between you and your creditors enabling you to pay your monthly payment over a period of five years. This monthly payment is calculated and decided by the debtor taking into account all his assets, liabilities and income and cost of living expenses.
Individual Voluntary Arrangements is needed when you as a debtor are over burdened by the debts. When you are unable to make due payments, you have become insolvent, thus law provides you with an alternative in the form of Individual Voluntary Arrangements. IVA is best to choose because unlike other informal arrangements, IVA makes you get all of your creditors to reschedule your debts.
IVA Structures
IVA most commonly is structured around one affordable monthly repayment that goes for a period of 60 months. This monthly amount depending upon the affordability of the debtor ensures the security of payments of all the other priority commitments of the debtors like mortgage, rent, car finance etc.
The less often used alternative of IVA is known as “Full and Final Settlement” or “Lump Slump” Individual Voluntary Arrangement. It is based on a single “One Off” payment.
How to Get an IVA
In order to go for Individual Voluntary Arrangements, you have to set up an IVA Proposal. An IVA proposal is prepared by a licensed Insolvency Practitioner (IP). This IP acts as third party between you as a debtor and your creditors. Once a proposal prepared by IP gets approved by you, it is presented to creditors by IP. Then this proposal is accepted or rejected by creditor’s votes. At least 75 % votes are needed in favor of proposal to get it accepted. Even if Creditors accept the proposal, they can make certain modifications on debtors consent. Once this proposal is accepted, it is debtor’s responsibility to pay the agreed payments to IP who ensures its distribution to all the creditors on pro-rata basis. It must be noted by the debtor that a failure to pay an agreed payment leads to the failure of IVA. So if you find any problem regarding payments you should consult it to your IP who can re-negotiate with the creditors. This is why to get an IVA agreed, clear statement of your financial situation is needed to be drawn up that can realistically shows all your expenses so that an affordable monthly cost can be agreed. Upon a successful completion of IVA, the debtors is considered debt free, though in actual fact he has not paid off all their debts in full so that debtor can make a fresh start financially.
Features of IVA
An IVA is a loan arrangement process made for a fixed period of time which is not more than five years.
Once you have get IVA agreed, your creditor cannot ask for payments because it has already agreed by law.
Through IVA you are agreed for a monthly payment which is best affordable by you but in some cases, proposals are based on payment of a one off lump slump.
An IVA is a private sort of agreement between you and your creditors so unlike bankruptcy, no public notices are made against you.
An IVA is a flexible solution regarding payments of your debts because its terms can be modified with the consent of your creditors.
Pitfalls of IVA
IVA is only suitable if the debtor has unsecured debts of at least £12,000.
The debtor has to declare all his assets and liabilities; otherwise he can be inquired by the creditor.
At least 75 % votes of the creditors are needed in favor of proposal to get IVA agreed.
You have to be very realistic while figuring out your monthly payments, because failure to pay these amounts can lead to the failure of the IVA.
