Introduction to IVA
IVAs are rather modern alternatives to filing for bankruptcy. With the Insolvency Act of 1986, it made it possible for individuals to have alternative means of settling their debts than just through filing for bankruptcy. An IVA or Individual Voluntary Agreement is a contract between a debtor and his or her creditors. This agreement will normally last for five years, and at the end of the five year term, the individual will be free from debt. During this five year period, there will be a fixed amount of money that one must repay and the amount will be based on his or her available income. The amount agreed upon will then be paid in equal monthly instalments. These types of financial arrangements work best for individuals that have familial support as a major source of income, or those that have a decent income on their own. Debt management companies supervise IVAs.
How Does an Individual Arrange an IVA?
Before an individual can secure an IVA, he or she must ask a debt management agency to oversee the arrangement. Under the guidance of a debt management company, the individual will make the proposal for the IVA. This occurs in court much like a bankruptcy proceeding and all items will be covered as well as the realistic payments plan. After this hearing, all of the individual's creditors will be sent a copy of the IVA proposal, along with any details on future scheduled meetings to discuss the IVA. The creditors, at this meeting, will be given the opportunity to vote as to whether or not the individual deserves the IVA agreement or not.
The individual's proposal must be passed by at least 75% of the creditors, and the creditors that have not shown for this meeting or have voted against, must still abide by the terms of the majority. If a creditor did not receive notice of the scheduled hearing, that creditor is exempt from any and all terms that have been specified by the IVA. This is one of the major reasons it is especially important to have on file all the names and information for all of one's creditors.
It is important to note that the individual needs to have debts over £15,000 and owed to at least three creditors before he or she is allowed to apply for an IVA. All that matters is that the majority of one's creditors agree with the arrangement. This will include the terms of the agreement, the amount of the outstanding debt, the individual's income levels and the costs involved with the administration of the IVA hearing. Because an IVA is a legal document, if the individual's circumstances change at all during the course of the term of the arrangement, he or she must invite the creditors back to court to attend a variation hearing. At times, this can lead to amending the proposal.
The Benefits of an IVA
Bankruptcy has always been the old standby for individuals that were facing monetary troubles. Bankruptcy is a very costly affair that many times is in the eye of the public. Because the individual files for bankruptcy, he or she loses control over the assets that he or she once owned and these will be sold to help pay back his or her creditors. With an IVA, the individual does not have to sell any of his or her personal property and the efforts in court will be kept private and will not go public. Aside from this, one of the other benefits of an IVA is the fact that, since it is an arrangement it costs much less than filing for bankruptcy.