Product/Service :- IVA - Individual Voluntary Arrangement.
Description :- An IVA is a voluntary agreement with creditors. It’s entered into with the assistance of an Insolvency Practitioner, who will work to secure the agreement of your creditors to a payment proposal.
Eligibility :- Typically carrying consumer debts of £15000 or more, you will be struggling to meet current repayments to your creditors. You may be able to pay a certain reduced amount per month towards your debt, or you may be able to release a lump sum through re mortgaging your home or sale of another asset.
IVA Advantages
- There isn't the stigma or publicity that accompanies bankruptcy.
- A business can continue to trade and generate income.
- The debtor, via the insolvency practitioner, is involved in the choice of assets made available to the creditors since the arrangement is designed to suit the debtor's situation. All this is providing the creditors are no worse off than if bankruptcy had taken place.
- Administration costs should be lower than bankruptcy, enabling higher payments for creditors.
- Creditors can still claim tax relief against bad debts just as with bankruptcy.
- Creditors who vote against the IVA are still bound by it as long as 75% of the creditors in terms of the amount owed agree to it.
- Creditors likely to recognize that they must accept less than all the money owed.
- The debtor does not suffer from the same restrictions as those imposed on bankrupts. For example, a debtor can still be a company director, in the armed forces, hold public office, retain their professional status or trade under a business name.
- The debtor is able to operate a normal current account, as long as it does not have an overdraft facility.
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IVA Disadvantages
- Usually only suitable if the debtor has unsecured debts of at least £15,000.
- To gain approval, creditors representing at least 75% of the value of the money owed, as well as a simple majority, must agree to the proposed arrangement.
- IVAs usually last for five years and payments are typically higher.
- The home and assets of the debtor can still be at risk if the creditors decide not to exclude them.
- Should the IVA fail, the debtor can still be made bankrupt. If this happens, the costs of the IVA will be added to the debts.
- The insolvency practitioner will closely supervise the debtor.
- All IVAs are recorded in a public register and will almost automatically appear on your credit file. This could affect any future applications for credit.
- No more borrowing allowed during the IVA period
- Default on an IVA could result in bankruptcy proceedings
- 5 year period vs. maximum 3 year period of bankruptcy
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