IVA Information
If youre thinking about an IVA, it is
essential to get the best information possible. This
is because although an IVA can be a manageable way
to resolve your debt problems, it can also represent
a commitment of up to five years. Getting good IVA
information is an important part of deciding whether
you want one.
This article provides IVA information
and an overview of the IVA process to help you make
an informed choice about how to solve your debt problems.
What Is An IVA
The Insolvency Act of 1986 introduced
the IVA as an alternative to bankruptcy. An IVA enables
debtors to try and reach a settlement with their creditors
which usually involves the repayment of the debt in
monthly installments and a reduced repayment amount.
An IVA is a legally binding contract between debtor
and creditor.
Information About The IVA Process
You find an Insolvency Practitioner
to act on your behalf to draft and propose the IVA
to your creditors. The process of applying for and
setting up the IVA usually takes about 4-6 weeks,
which includes activities like fact finding, collecting
evidence, drafting the IVA proposal, sending the proposal
to the creditors and waiting to hear whether it has
been accepted.
During this time, in the majority of
cases, the debtors will only need to take part in
minor activities at this stage like providing evidence
and signing the documentation.
The IVA that is proposed to the creditors
is based on what the debtor can realistically afford
to pay over a five year period. In most instances,
it is be made up of sixty monthly payments, although
it can also include lump sum contributions such as
from the release of equity from a property.
Whether or not an IVA is approved by
the creditors depends on its receiving a 75% majority
in favour of it. Most lenders have standard terms
for what they will accept, which normally includes
a reduction in the overall level of debt by as much
as 75%.
When the IVA has been approved, it runs
for a five years. During this time payments are made
on a monthly basis into a fund governed by the Insolvency
Practitioner. The money in the fund is used to pay
off the creditors and the Insolvency Practitioners
fees.
Also during the period, the creditors
are required to freeze all interest on the debts,
and they are not allowed to pursue the debts.
If at the end of the five year period,
the IVA has been satisfactorily completed, all of
the debts are cleared.
Why Were IVAs Introduced
The IVA was initially designed as a
convenient way of processing insolvency cases without
incurring the costs and court time involved in bankruptcy
proceedings. The IVA process is therefore much simpler
than bankruptcy and the outcome is significantly less
severe.
Information to Help You Decide If
an IVA is Right for You
An IVA is appropriate for those who
are unable to pay off their debts but do not want
to file for bankruptcy. An IVA is likely to succeed
if:
- You have a minimum unsecured debt of around
15,000 -20,000.
The Advantages Of An IVA
- An IVA enables you to only pay back an agreed
percentage of your debts
-
-
While an IVA is in place, your
creditors are not allowed to harass you.
-
Unlike bankruptcy, an IVA doesn't
affect your professional status or your ability
to hold public office.
-
With an IVA, interest on your
loan is frozen which means that your debt won't
keep growing
Mike Curry runs a free and independent
national IVA information and advice line called Clear
Start. For further information, please click here:
Individual
Voluntary Arrangement or telephone 0800 138 5445.
