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What is an IVA?

What is an IVA?
IVA Pros and Cons

IVA stands for Individual Voluntary Arrangements. It is a safe alternative for people who have debts over £15,000, are struggling to meet their repayments and can afford £200 or more towards their unsecured debts. It is one of the best debt help alternatives to bankruptcy. An IVA arrangement would be drafted up by the client’s Debt Advisor. The debt advisor would calculate a payment based on the clients income and expenditure and then propose an affordable amount to repay back to the creditors. There is another debt help alternative called a Debt Management Plan or DMP which works in a similar way to an IVA but is deemed a less formal arrangement between the debtor and the creditor.

How does it work?

The process of an IVA debt help arrangement is simple. The overall debts are consolidated into a single payment to be made every month. This is extended over a course of 60 months. The client’s debt advisor will incorporate all expenses, income sources, liabilities and assets, whilst calculating the estimated monthly payment. One of the prerequisites of an IVA debt help arrangement is that the monthly payment should be affordable for the debtor. It should also not affect existing payment patterns towards the utility bills, mortgage, council tax, rent etc.

There is another alternative arrangement to an IVA which is called ‘Full and Final Settlement’. This process involves computing a single, lump sum payment that takes into account all the debt payments to be made. For more information on ‘full and final settlements’ contact us.

IVA legal requirements

An IVA debt help arrangement needs to be made by an Licensed Insolvency Practitioner or IP. This person acts as the Nominee for the IVA. The proposal is presented during a meeting of creditors. Before the actual meeting, a draft copy is sent to debtor for approval. If there have been legal proceedings against the debtor then an interim order, or a protection order can be applied for. The IP will use his or her discretion on whether to apply for such an order or not. The copies of the IVA are circulated to all the creditors, informing them in advance about the date and venue of the meeting. Although most meeting’s today are done via post or fax. The IP acts as a moderator of sorts, trying to reach a mutual consensus between the creditors and the debtor.

Consumer IVA

In case of a consumer IVA, i.e. an IVA for members of the general public, creditors are not required to attend the meeting. Instead, they can vote either by post or by fax. The debtor also need not attend the meeting. Instead he or she will be asked to be near the telephone so that they can listen in on the details of the meeting. If debt help is being sought for debts incurred during commercial transactions, i.e. a business debt, then the debtor maybe required to be in the meeting in person.

IVA Debt Help Conclusion

Once the IVA is approved by the debtor and creditors the debtor will need to pay the arranged amount on the specified day each month. If the debtor is unable to afford paying this new amount then he or she should seek assistance from their debt advisor. They will renegotiate on his behalf with the creditors to arrive at a more affordable solution. Thus, as you can see, an IVA is an excellent form of debt help. It is a safe and practical method to become debt free.