An Individual Voluntary Arrangement might be the right solution for your debt, depending on your circumstances. Sometimes, and IVA is the only thing that can save you from bankruptcy. While the IVA may have its advantages, the disadvantages can be very restrictive, so explore your options carefully.
You must owe at least 15,000 in unsecured debt to qualify for an IVA. Additionally, you must have a regular income that allows you to make monthly payments toward your debt, after all your other monthly bills have been paid. If you can’t afford a monthly payment, you may have to enter into bankruptcy. An IVA will become a legal agreement between you and your creditors, set up by an insolvency practitioner, giving you up to five years to repay your debt.
The insolvency practitioner will meet with your creditors and create a plan for your unsecured debt repayment. It is possible that the practitioner can get your creditors to agree to a plan that could erase up to 75% of your debt if more that 75% of your creditors will agree to the plan. Your insolvency practitioner will make the financial arrangements with your creditors, and will likely have to haggle to reach mutually agreeable terms. If the IVA is approved, you then make one monthly payment that will be split between your creditors. A portion of your monthly payment will also go to pay the insolvency practitioner’s fees.
To a debtor, an IVA’s advantages can be great. Unlike bankruptcy, those in an IVA do not risk losing their home. Your debt is usually reduced by a large amount, you pay no interest fees, get no calls from creditors, and the fees charged by the insolvency practitioner are usually less than the fees you would pay in bankruptcy. Payments you make toward your debt are income based, and can fluctuate with your income. Although both a bankruptcy and an IVA stay on your credit report for six years, an IVA looks better to future creditors and carries fewer stigmas. During an IVA, you are allowed to apply for credit.
One of the disadvantages of an IVA is the expense; while it’s less expensive than bankruptcy, the insolvency practitioner fees will be costly, and other forms of debt solution might be cheaper. Another problem that many people find difficult is that throughout the IVA, your finances are closely monitored. You will have to explain any unusual activity and any extra monies you receive during the period will have to go toward the IVA, including work bonuses and inheritances. If you should fail to meet the requirements of the agreement, you may be forced into bankruptcy.
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