IVA : The Debt Help Solution Explained

With the ever growing personal debt mountain in the U.K. passing through the £1 trillion ceiling, more and more people are searching for a way out from beneath crippling personal debts.
One debt solution that has come to the fore recently is the Individual Voluntary Arrangement (IVA). But with its debt write-offs and fixed term, is it the perfect debt solution that people are searching for?

In my capacity as a debt adviser, it has become apparent to me that when people are faced with a spiraling debt problem, they generally do one of two things. They either seek advice to solve the problem, or they ignore the situation and try to continue as if nothing is wrong, hoping that by a miracle, their debt problem will go away.

Unfortunately, however, ignoring a debt problem can have devastating long term effects. The situation can become very difficult, very quickly and can create a blight on a credit file for a considerable time.

So are Individual Voluntary Arrangements (IVAs) the perfect debt solution? The first thing to do is to learn more about them.

An Individual Voluntary Arrangement (IVA) is a formal agreement that allows someone with substantial unsecured debts, who is unable to afford their monthly repayments, come to a new arrangement with their creditors. An Individual Voluntary Arrangement (IVA) will normally consist of 60 monthly repayments, calculated on what the debtor can actually afford, after all their general living costs have been taken into account, and will replace the original agreed monthly payments for the original debts.

An Individual Voluntary Arrangement (IVA) is arranged through an Insolvency Practitioner. Their role is to prepare all the necessary paperwork and liaise with the creditors on behalf of the debtor. It is the Insolvency Practitioner who represents the debtor at the beginning of the Individual Voluntary Arrangement (IVA), that generally acts as the Supervisor for the full term of the Individual Voluntary Arrangement (IVA).

The Individual Voluntary Arrangement (IVA) offers several benefits to both the creditors and the debtor.

The advantages for the debtor whilst they are in an Individual Voluntary Arrangement (IVA) are:

• The required monthly repayments are set at an affordable level for the debtor, allowing them to continue with their life without the burden of their debts.
• The agreement will not last more than 5 years.
• If all the original debt is not repaid within this 5 year period, the creditors are obliged to write-off the remainder.
• The agreement is private, and although it is recorded on the IVA register and the credit register, it is not published in the press.
• The agreement is private and the debtor's employers will not be notified.
• The Individual Voluntary Arrangement (IVA) solution is available to debtors whose occupation would restrict them from going Bankrupt
• A creditor cannot take legal action against the debtor.
• A creditor cannot contact the debtor at all.
• A creditor cannot request changes to the agreed monthly repayments.
• A debtors home is not at risk to the creditors.
• An IVA allows the debtor an alternative to Bankruptcy.
• A debtor does not suffer the stigma that surrounds Bankruptcy.

And the disadvantages of an Individual Voluntary Arrangement (IVA) to a debtor are:

• If the debtor continually fails to make regular Individual Voluntary Arrangement (IVA) repayments, the creditors have the option of making the debtor Bankrupt.
• The debtors credit rating will be affected for up to 6 years from the beginning of the Individual Voluntary Arrangement (IVA)
• A debtor is not allowed to obtain any credit whilst in an Individual Voluntary Arrangement (IVA).
• A debtor will have to have their finances monitored, via an annual review, by the Insolvency Practitioner throughout the Individual Voluntary Arrangement (IVA) agreement.

For the creditors, the advantages of an Individual Voluntary Arrangement (IVA) are not so numerous, but in essence still make financial sense.

• The debtor commits to repayments, where no recent repayments may have been made.
• The debtor will pay all his creditors without preferences, each creditor will receive a pro rata return for the debt owed to them.
• The creditors keep the ability to petition for a debtor's Bankruptcy, should he fail to continue making repayments.
• The creditors can look forward to receiving a higher repayment dividend for the debts they are owed, compared to the debtors bankruptcy dividend.

So, over all, both parties are able to move forward with confidence.

As to whether an Individual Voluntary Arrangement (IVA) is a more suitable solution than bankruptcy depends on the personal circumstances of each different case, but that's another subject!

If you would like to know if you qualify for an Individual Voluntary Arrangement (IVA) click here and ask 'The Debt Detective.'

If you would like to call and discuss your personal circumstances regarding Individual Voluntary Arrangements (IVAs), or any other debt related problems, your are welcome to call myIVA-Adviser.com on 0800 088 7503. You will be given free, clear, concise and ethical debt advice. We specialise in helping people find the best solution available to them. All your details will remain confidential, and our small, specialist team will be at your side to guide you out of troubled waters.

Remember, now is not the time to be an ostrich, because help is at hand.

• FAQs - IVA Process
• Individual Voluntary Arrangements
• IVA Advice
• IVA Information