IVA UK-Iva Information

This May, the Department of Trade and Industry in the UK found that there were 10,091 bankruptcies in the first quarter of 2005. This represents an increase of 24.5% on the corresponding quarter of last year. Bankruptcy can leave an individual feeling ashamed, depressed and out of control. Furthermore, for many the stigma of bankruptcy can be too much to bear.

However, there may be an alternative to going bankrupt which can also help people in serious debt to make a fresh start.

The Insolvency Act of 1986 introduced The Individual Voluntary Arrangement (also known as an IVA) as an alternative to bankruptcy.

The idea behind the introduction of the Individual Voluntary Arrangement was to enable people facing financial difficulties to come to a formal agreement with their creditors rather than having to face bankruptcy. If an IVA is agreed between the debtor and creditor:

Interest on the loan is frozen

Legal proceedings are stopped

The overall debt is reduced

An Individual Voluntary Arrangement is generally seen as a more favorable option than bankruptcy from both the debtor’s and creditor’s perspective. This is because there are no fees or legal proceeding involved with an IVA, unlike with bankruptcy. Furthermore, from the creditor’s point of view, an Individual Voluntary Arrangement offers a greater repayment of the debt than would otherwise be achieved if the debtor were made bankrupt.

IVAs represent an exciting new opportunity to those facing serious debt to both avoid bankruptcy and to make a fresh start. Mike Curry is the head of Clear Start- a free national support service for those facing serious debt. Clear Start offers independent advice on debt management and individual voluntary arrangements. For more information please visit Clear Start.org

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Individual Voluntary Arrangement or IVA was introduced by the government as part of the Insolvency Act, 1986. It was basically introduced as an alternative to bankruptcy. An IVA supports the interest of both you and your creditors. It is a legally binding contract between you and your creditors that enables you to repay only a certain percentage of your debts to your creditors. The interest on your loan is frozen which does not allow it to grow any further.

Your eligibility criteria for an IVA will depend on your personal and financial circumstances.

1. You have to be a resident of England, Wales or Northern Ireland. You can be currently living or working abroad. But it is not eligible to those residing in Scotland or outside of the United Kingdom.

2. Your unsecured debts should be over £15,000. Setting up and supervising an IVA is an expensive business so it would not be worthwhile to set up an IVA for smaller amounts of debts.

3. You need to be able to pay a minimum dividend of 30% to your creditors. Creditors usually do not accept an IVA that gives than less than 30% of what is owed to them.

4. You need to be insolvent which means that you should not possess any material assets that you could use to pay off your debts. This criterion prevents debtors from using IVA as a mechanism to avoid repaying debts in full.

5. You need to owe money to at least three different creditors. You cannot be holding three debts to the same bank.

6. You either need to be employed or should have a regular stream of income. You should have documents that prove you have a stable income. Usually, the criteria states that you need to have a monthly disposable income of at least £200.

The IVA team will assess whether you meet the above criteria and then will let you know whether you qualify or not. All these criteria are not entirely rigid and creditors will assess a case on its own merits. In case you do not qualify, you may be recommended other debt solutions such as debt management or debt counseling.

I am a content writer presently freelancing with various websites. I was previously working for an e-learning company.

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An IVA is a true alternative to bankruptcy. An Insolvency Practitioner (IP) is responsible for liaising with your various creditors to help work out terms in your favor and ensure that you adhere to the agreed payment amount.

What is an IVA?

An IVA is a formal, legally binding agreement between a debtor and his creditors. Designed to free you of the burden of debt in five years or less, an IVA does not publicize your insolvency like bankruptcy. As per the agreement an IP helps you distribute a single monthly payment (over a set period of time usually 5 years) equally between participating creditors. If you have any assets (including equity in your property) it maybe made available to your creditors. However you remain in charge of how they are disbursed.

How Will You As A Debtor Benefit From An IVA?

•High interest rates and charges on all your debts will be frozen

•You can retain your home and assets

•Your employment will not be affected

•Re establish your credit rating

•Self employed can continue to trade

•You are rid of creditor harassment

Are There Any Disadvantages With The Choice Of An IVA?

•75% of your creditors have to agree to the terms and conditions of the IVA

•IVA is a debt solution only if you owe £15000 or more to one or more creditors

•You maybe forced into bankruptcy if you don’t adhere to the terms of your IVA

•The Equity Release clause in a majority of IVA agreements prevents you from selling your home

The IVA Process

•An appointed Insolvency Practitioner (IP) prepares an IVA proposal for you

•IP files an Interim Order in court to stop/prevent legal action against you

•A creditors meeting decides whether your IVA is accepted or rejected

•When accepted, your IVA comes in to being

Number of IVAs set to Increase this Year

More and more people are agreeing that they can no longer afford to pay back their debts and are looking for debt solutions that work best for their circumstances. Surveys carried out reveal that one in five people possess unsecured debts of more than £10,000. Most debtors are considering an IVA as a practical and effective means to deal with their debts.

Life is all about the choices that you make and what you get out of your life depends on your choice. You made the choice of reading this article on information on IVA and it probably helped you gain a better understanding of the process of an IVA, its pros and cons so you can decide if an IVA is the ideal solution for you.

For more information and help log onto IVA Solutions.

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