Written by An IVA or Individual Voluntary Agreement could help anyone who is experiencing problems repaying their debt. It is an exceptionally appealing offer to households who would risk losing their home if they became bankrupt.
An IVA can help you if;
Your creditors have not agreed to an informal debt management agreement
You formerly had an informal arrangement, but you could not keep up with its provisions.
You are in debt to so many creditors that an informal debt management arrangement would be impractical. You are being made bankrupt, alternatively you have already become bankrupt and you want to reverse that position. You formerly had an informal arrangement, but you could not adhere toits provisions.
Your lenders have not accepted an informal debt management arrangement
You are being made bankrupt, or you have already become bankrupt and you want to alter that position.
You have so many creditors that an informal Debt Advice arrangement would not be practical.
You may have a start up business which you could not keep operating if you became bankrupt. You would be made redundant if you became bankrupt, jobs such as solicitor, accountant, the armed forces, police. You have a significant amount of capital but it is still inadequate to fully repay your lenders. You want a formal arrangement with your lenders to accept that lump sum and write off the balance of what you owe.
You have equity in your house. You will not necessarily lose your home if, with the agreement of the IP and your creditors, it can be kept out of the Individual Voluntary Agreement. However, your creditors will usually ask for as much of the equity in your home as they can get. With an IVA you are not as hampered restricted as with bankruptcy. For example, with an Individual Voluntary Agreement (IVA) you are not obligated to tell your building society. So you can still be able to use your bank account.
The Disadvantages of an IVA
If you are unable to comply to the conditions of your IVA, then the Insolvency Practitioner who is supervising your IVA or Individual Voluntary Agreement or your lenders, can petition for your bankruptcy.
If 75% of your creditors refuse to agree to your proposed IVA you are subsequently back to square one. It will be twelve months before you can make another IVA proposal. You need to get it right.
If you are a homeowner, it could be that under the terms of the IVA or Individual Voluntary Agreement you have to sell your house. An alternative method is to include a clause in your IVA whereby you get your home valued after an prearranged time frame with the aim of releasing the “equity” in your house at that time, to your lenders. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your money situation changes and you can’t afford the repayments, unless your Insolvency Practitioner can persuadeyour lenders to agree to a revised agreement, your IVA will terminate. This can mean you are facing bankruptcy.
