While IVA's have been increasing most people are still unaware of what this debt solution has to offer and how it can benefit them. In this article we will discuss what an IVA is and how it can help those facing financial problems.
IVA's were created to help people pay back a portion of their debt and to stop people from having to declare themselves bankrupt. IVA stands for Individual Voluntary Arrangement, this is a formal debt solution which is legally binding once it begins. Creditors like IVA's because they generally receive more of they are owed than if the person in debt were to file for bankruptcy. Debtors like IVA's because it doesn't have as a severe effect on a persons life i.e they are able to keep their house, the payments are more manageable and while their credit rating is badly affected it isn't as bad as it would be with bankruptcy.
Only qualified professionals can administer an IVA. This is usually an insolvency practitioner but there are a number debt advice charities who can offer debt advice which would not cost anything to those requesting help. These debt advice charities can help to package an IVA for the debtor. Once a person has spoke to a debt advice charity they will be taken through an income and expenditure. This will show how much money the debtor has left each money to pay towards creditors after all expenditure is taken from the income. Which will help to ascertain just wither or not they are suitable of an IVA. If advised that an IVA is the best debt solution then the debt advice charity would pass all the case to an Insolvency Practitioner (I.P). All these details are put to your creditors along with a proposed monthly payment.
If a person owns their own property, then any equity they have available in their house will be included into the IVA proposal as part of the repayment offer. The insolvency practitioner will require a person to release any equity before putting an offer forward. This will then be put into the IVA fund which is offered to the creditors. If the property is jointly owned then only the debtors share of equity is normally considered under the IVA.
For the IVA to be accepted then more than 75% by value of unsecured creditors vote in favour of the IVA then it has to be accepted by all the unsecured creditors. If a person has 4 creditors and one of them is owed 76% of the total amount in unsecured debts then they will have the their vote would be the one that counted the most. So if they refused the whole IVA would be rejected and if they accepted then the IVA could begin, this would mean that it didn't matter what the other 3 creditors voted.
If the IVA is rejected then there is still chance for the debtor. This is because they do have an opportunity to re-submit an improved IVA proposal. If this is not an option, due to funds or other demands then it is best to go back and speak with the debt advice charity again and they can help to find another solution. It maybe that they will help setup an informal debt management plan. It is strongly advised that no IVA payments are missed but in most cases this will be understood and possibly written into the agreement. The IVA is a legally binding agreement. If payments are missed then there is a risk that the trustee can force bankruptcy. If a persons personal circumstances change then an IVA can be altered to reflect this as they can be flexible depending on the circumstances.
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