What are IVA's ?
What is an IVA?An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors where you will come to an arrangement with people you owe money to, to make reduced payments towards the total amount of your debt in order to pay off a percentage of what you owe Then generally after 5 years your debt is classed as settled.
Due to its formal nature, an IVA has to be set
up by a licensed insolvency practitioner.
We will need
to ask you a number of questions about your financial situation in order
to calculate how much you can realistically pay your creditors each month.
This is based on what you can afford, not what creditors are asking for.
Once proposals for repayment have been drawn up, an Interim
Order is applied for. Whilst the Interim Order is in place, your creditors
cannot take action against you without asking the Court.
A meeting date will be arranged and full proposals sent to all creditors
who will then have the opportunity to vote on them.
Positive Aspects of an IVA
There isn't the stigma or publicity that accompanies bankruptcy.A business can continue to trade and generate income.
The debtor, via the insolvency practitioner, is involved in the choice of assets made available to the creditors since the arrangement is designed to suit the debtor's situation. All this is providing the creditors are no worse off than if bankruptcy had taken place.
Administration costs should be lower than bankruptcy, enabling higher payments for creditors.
Creditors can still claim tax relief against bad debts just as with bankruptcy.
Creditors who vote against the IVA are still bound by it as long as 75% of the creditors in terms of the amount owed agree to it.
Creditors likely to recognise that they must accept less than all the money owed.
The debtor does not suffer from the same restrictions as those imposed on bankrupts. For example, a debtor can still be a company director, in the armed forces, hold public office, retain their professional status or trade under a business name.
The debtor is able to operate a normal current account, as long as it does not have an overdraft facility.
IVA's
are usually only Suitable If:
the debtor
has unsecured debts of at least £15,000.
To gain approval, creditors representing at least 75% of the value of
the money owed, as well as a simple majority, must agree to the proposed
arrangement.
IVAs usually last for five years and payments are typically higher.
The home and assets of the debtor can still be at risk if the creditors
decide not to exclude them.
Should the IVA fail, the debtor can still be made bankrupt.
If this happens, the costs of the IVA will be added to
the debts.
The insolvency practitioner will closely supervise the debtor.
All IVAs are recorded in a public register and will almost automatically
appear on your credit file. This could affect any future applications
for credit.
N.B. There is no substitute for professional advice
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What are IVA's
