So what actually is an IVA?
It was the government who launched the Individual Voluntary Agreement (IVA) scheme which is a legal process, allowing individuals to choose a simple, structured debt management solution allowing them to retake control of their debt and put a stop to their debt problems. Debt and the unfortunate problems that go with it now exist in all levels of society and affects affecting people up and down the country. This can be for a wide variety of reasons but the common aspect is that debt can become difficult to manage very easily. It is when this happens that people affected by debt must acknowledge the problem and take the required steps to resolve and manage the problem.
An IVA is recognised in the courts where the individual in debt, known as the debtor, enters into an agreement with the organisations owed the money, the creditors, to make a reasonable, affordable payment over an agreed term, which is usually five years. The remainder of their unsecured debts are then written off. This enables the individual to clear up their finances, and make a fresh start.
The IVA process
In order for the IVA to be recognised legally, an IVA must be brought into effect through a recognised and licensed insolvency practitioner who, once appointed is usually referred to as the Trustee. This person will administer the IVA process and is responsible for ensuring that all legal protocols and guidelines are followed as they should be.
Advice will be provided to the debtor by the Trustee, and that individual will also deal directly with the creditors. A formal proposal will then be written up, explaining the monthly amount that is proposed to be paid, and the amount of debt that will subsequently be written off. All parties then have to agree in this, as otherwise the proposal cannot be made into a legal agreement and the debtor will be unable to write off their unaffordable debt. The Trustee will always deal with the creditors, which minimises delay in the proceedings and also helps relieve anxiety on the part of the debtor if they have had previous difficult dealings with the creditors.
An Individual Voluntary Arrangement is an alternative solution to bankruptcy that enables a great deal more flexibility for the debtor. A key part of this is that the Trustee has an obligation to ensure the debtor receives good IVA advice. It allows the debtor to have a voice in how their personal possessions and valuable assets are dealt with. It can also allow the debtor to keep control of their home. An important point also is that it doesn’t have the same restrictions that bankruptcy has on certain professional or public jobs that people hold.
Going ahead with a IVA
Once the drafted proposal is read and accepted by all parties then the IVA legally comes into force and is registered with the courts. This means that both the debtor and creditors enter into agreement so that the creditors cannot take any action against the debtor, or pursue them outside the terms of an IVA. For the debtor, the agreement means that they must abide by the terms and conditions of the IVA as it has been put in place, and meet the regular payments. If they do make these regular payments over the full term of the agreement then they will be discharged from the IVA and their debt. It is important that the debtor meets these regular payments as failure to do so could result in bankruptcy.