24November2009
Individual Voluntary Arrangement
An Individual Voluntary Agreement is a method of avoiding insolvency for somebody who has unpaid debts by way of contractual agreement with creditors. What an IVA does is to cut the debtors debts and clear them within a predetermined period at a level where the debtor can give.
The UK’s Insolvency Act 1986-Part VIII is the directive wherein Individual Voluntary Agreements fall under. This law generally constitutes cases for individual and company bankruptcy and how arrangements such as IVA should apply. IVA advise usually takes place in an insolvency proceeding jointly with the debtor and creditors, and the “arbiter” who is in charge for the implementation of the arrangement is a licensed Insolvency Practitioner.
Depending on the person’s position, IVA can be modified in terms of the amount to be remunerated by the debtor. The person may also need to present a complete file of his/her assets in order for creditors and IP alike, make a complete assessment and eventually authorize the IVA. Monthly salary, financial savings, and even third party payments, are considered assets for a proposed IVA.
As a rule, a group of creditors call on a meeting to talk about an IVA proposal. Individual Voluntary Arrangements is a more desirable option for both creditors and debtors because of the higher returns it will give out creditors and a cleaner credit record and affordable payment terms. In the proceeding, a certain percentage of votes should be considered before an IVA can be accepted. If the creditors represent themselves in person or by proxy, more than 75% must agree in the approval of the arrangement. If the majority of creditors are represented via business connections, relatives or friends, a second count is taken and there should be a 50% approval from the non-associated creditors.
Several benefits come with getting Individual Voluntary Arrangements. Some of which are the protection of the debtor’s home, does not risk the debtor’s job, and prevent the collapse of the debtor’s credit rating. Furthermore, an IVA is a complete classified arrangement between only the debtor, advisor and creditors. In contrast to bankruptcy, IVA is not announced and it even makes it feasible for the person under it to get credit and housing loans.
A ceiling period of five years is given to the debtor who is under an IVA where he makes manageable monthly payments. If everything goes according to the arrangement, the residual debt is erased, making the debtor debt free. This is one of the nice qualities of getting an IVA. It can potentially write off up to 70% of an individual’s debt. Not knowing how to pay you debts is overwhelming, but with the correct IVA, advisors and creditors, your debt problems will ultimately get fixed in no time.