A fundamental precondition for being permitted to be accepted into an Individual Voluntary Arrangement (IVA) quite simply will need to initially be insolvent. Whilst there are different solutions for the insolvent debtor for instance bankruptcy, this assessment is going to simply look at the advantages and drawbacks of the IVA choice should you be unfortunate enough to find yourself in this difficulty.
An IVA brings relief from your financial situation while enabling you to repay as much as possible to your creditors. You prevent the stigma of bankruptcy with its associated disabilities, limitations and commitments, while helping you to keep greater management over your assets by for example having the ability to retain your property and your vehicle. Within an IVA you are able to continue to keep your occupation and if you are self-employed you can continue in business for the full duration of your IVA resulting in larger dividends for your lenders.
Your IVA will be binding on all your lenders, among them dissenting lenders, so long as it is agreed on by 75% of the creditors who opted to vote at the official meeting of creditors. Voting privileges are based on the total amount of personal debt you have with each creditor. One way to consider it is that each pound of debt is the same as one vote. You will reach a better degree of realizations in an IVA than you would attain in bankruptcy, bringing about more significant dividends for your lenders. Additionally, you will sustain lower charges in an IVA than you would shoulder in bankruptcy, just as before resulting in higher dividends for your lenders.
You’ll be subject to less publicity through all stages of an IVA than you would experience in bankruptcy. For instance, in an IVA there is no compulsory publication of your name in newspapers or other periodicals. Should your situation change appreciably over the duration of your IVA, you can, with the permission of your lenders, vary the conditions of your IVA. There is also a trend towards negligible (and reducing) court involvement in IVAs. This benefits you and your creditors. The IVA process is well regulated therefore you have an advanced level of defense against unethical behavior. On approval of your IVA, all creditors must stop getting in touch with you, interest on your debts is frozen and all penalties and charges are stopped. Your complete financial obligations are addressed and written off in a known and finite time period – usually five years – but it can be faster.
Your monthly payments in an IVA will be affordable. As an alternative to monthly payments you can go into a one-off IVA by making a solitary lump sum payment with a considerably shorter duration of maybe under one year. You do have to pay the set-up, supervision and disbursement fees of the IVA. However, these costs are taken from your monthly contributions to your IVA.
If lenders do not accept your IVA at the official meeting of creditors, they are free to continue other legal actions against you such as petitioning for your bankruptcy, obtaining court judgments against you or registering charges on your assets. As opposed to accepting or rejecting your IVA proposal as it stands, lenders in addition have the option of adjusting its conditions at the start. Such adjustments usually look to raise your monthly contributions to your IVA and your IVA may fail during its term of supervision if you are can not keep up such increased obligations. Lenders may look to reduce the level of living expenses which you may claim in your IVA making it less generous than what is allowed in bankruptcy. This increases the prospect that your IVA may fail in supervision if you cannot realistically live within the limits imposed. Unless you agree to the alterations suggested, then your proposal is considered to be rejected.
The period of your IVA during which you must make payments is typically five years versus no more than three years in bankruptcy. You won’t be allowed to borrow for the duration of your IVA, except with the specific approval of your supervisor and/or your creditors. You credit standing stays inferior even after completing the period of your IVA. Your own name will continue to appear on your files – as managed by the credit reference agencies- for six years from the beginning of your IVA or when your delinquency was initially recorded.
Once you have considered the advantages and downsides of an IVA for you, you should think of attempting to get professional guidance from one (or more) of the many organizations that offer insolvency services. They utilize the expertise of specialists called Insolvency Practitioners who will offer you free information detailing your entire alternatives. You should also give some thought to calling CAB or the CCCS and you may even have to take independent legal advice, specially when you possess or partly own assets for instance a family home, so that the legal rights of other people are protected. Such third parties include your partner or spouse (whether you’re co-habiting or estranged) any co-owners of property and also any dependents you may have.