An Individual Voluntary Arrangement (IVA) involves an agreement made between a debtor and a financier whereby the debtor commits to paying all or part of the money owed within a certain period. The borrower makes a single monthly payment to an Insolvency Practitioner (IP) who then distributes the money equally among all lenders. When you opt to deal with a debt problem through and IVA therefore, you have to engage an Insolvency Practitioner.
For the individual payments to be decided on an assessment of your assets, income, and expenditure is done after which normal expenses such as mortgages, utilities, tax, and food are deducted. The remaining amount is the contribution you are required make towards the IVA each month. Note however, IVAs can only help you sort out unsecured debts. If you have a secured loan, you must continue with the payments as usual.
Is an IVA better than bankruptcy?
For people who are deep in debt, filing for bankruptcy is a common option. However, depending on your circumstances, there are times when an IVA may be a better alternative. When you go bankrupt, your assets or business may be taken over by creditors to help recover some of the money. Thus, if you own a home, business, or other assets, choosing an IVA over bankruptcy can help you retain them and keep you safe from the social impact as well.
Still, for things to run smoothly, you have to work with a debt expert. It is only through an IP’s services that you can protect your possessions against creditors. As they negotiate on your behalf, IPs will try to make sure that your property is excluded from the IVA. The services of an IP are also important when it comes to determining the suitability of an IVA as a solution. They will take time to evaluate your situation, and then advice you if an IVA will be the best way out.
Benefits and drawbacks of an IVA
One of the key benefits of an IVA is that it allows you to pay affordable sums of money for a period of about five to six years. Once this time is over, the outstanding balance (if any) is written off and you are legally considered debt-free – creditors cannot hold you liable anymore.
Also, this arrangement is legally binding. Hence, even though you are obliged to make certain payments, you are also protected against creditors who may otherwise add more charges, issue Statutory Demands, take court action, or even bankrupt you.
While an IVA can be helpful, it also comes with its own pitfalls. For instance, like bankruptcy, it will affect your credit report, and it may lead to job loss if you work in professions such as an accountant, financial advisor or military officer. This is one of the reasons why getting IVA debt advice is so important.
To be certain about whether or not your occupation will be affected, you can look at the details of your employment contract, or talk to your HR department. It’s worth pointing out that you are more likely to lose a job through filing bankruptcy than IVA though.
All in all, even though IVAs can work for you when you are unable to stay in control of your debts, it is always best to be frugal with your finances because it is only then that you can keep debt problems from arising in the first place.