What Is An IVA?
An Individual Voluntary Arrangement or IVA as it is
more commonly known is a legally binding arrangement
that is supervised by a Licensed Insolvency
Practitioner.
The purpose of the agreement is to enable an
individual, sole trader or Partner ("the Debtor") to
reach a compromise with his creditors and avoid the
consequences of bankruptcy.
The debtor makes a proposal for repayment of part or
all of the debt that may well be far more attractive to
the people / firms etc that are owed money (the
"Creditors") than would otherwise be the case if
bankruptcy was enforced.
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IVA advice page
An IVA is a very viable option for many people in
debt. It is potentially far more appropriate for certain
debtors than, for example a consolidation loan.
There are many UNREGULATED debt firms on TV, Radio
and in the press offering consolidation loans and
similar products which can involve using your home as
security. Such schemes may not be suitable for certain
people and it is therefore vital that any debtor
seriously considers all available options - including
BANKRUPTCY or an IVA.
A few key points:
Who Can Benefit From An IVA
An IVA is available to all individuals, Sole Traders
and Partners who are in debt and cannot pay their
creditors. This arrangement is particularly attractive
to those have assets such as property which they wish to
retain. If you revert to bankruptcy - you will more than
likely lose your assets. The creditors can also
benefit from the IVA because as stated above they may
receive a larger payment than would otherwise be the
case were the debtor to become bankrupt. No
enforcement action can be taken by the creditors during
the life of the IVA - provided that the debtor complies
with the conditions fully.
How is an IVA set up?
A debtor must firstly receive advice from either an
insolvency solicitor or a licensed Insolvency
Practitioner. There are other "providers" who will set
the arrangement up but it is important to receive the
best possible advice. A regulated advisor would be
preferable. Once it has been decided that the IVA is
suitable (in some cases it may not be) the next step
involves instructing your solicitor to negotiate with
the creditors to present your proposals for repayment of
part of the debt. The Insolvency Practitioner then
becomes the "supervisor" of the IVA making sure that the
proposals are adhered to by the debtor. Failure to
comply may result in bankruptcy proceedings.
How long does an IVA last for?
This can depend on a number of factors but generally
a period of 3-5 years will be agreed upon by the
creditors.
How much will an IVA cost?
The costs can vary depending on the period of the IVA
and the amount of debt involved. Usually though set up
costs of around £1500 and further admin costs may be
charged. However these are usually added to the overall
debt and become absorbed by the arrangement. The charges
are therefore paid as part of the monthly instalments
towards the IVA.
BEWARE - the high level of fees
chargeable has led to a dramatic increase in IVAs in the
UK. Make sure the IVA is the best deal for you and not
simply the best deal for your advisor.
MORE INFORMATION ON:
Advantages & disadvantages of IVA schemes
More information on setting up and administering the IVA
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