Tuesday, 10 May 2011

The Individual Voluntary Arrangement (IVA)

An IVA is the Equivalent of a Protected Trust Deed but is only available in England, Wales and Northern Ireland. IVA's have helped thousands of people who face severe financial problems.

Ms E had went through a divorce over five years ago and lived with her grown up kids in a rented house through her local authority. She had debt outstanding at approx £40,000. Her debts were two loans and a couple of credit cards.

After the divorce there was only her income and Child Support payments from her ex husband. As the kids were 18 she didn't receive any child support and was struggling to pay her creditors. She was robbing Peter to pay Paul and had reached her limits on both credit cards.

After looking at all avenues Ms E has decided to enter an IVA.

The nominee looking after her case had sent out the proposal to Ms E and also to her creditors. Ms E had a disposable income of £300 per month. The monthly contractual payments for debt added up to £920 per month.
The meeting of the creditors took place and the vote went in favour of the IVA to go ahead meaning that in five years Ms E could look forward to a new beginning. Ms E now pays £300 per month into her IVA and will pay this until the IVA is complete at the end the rest will be legally written off. All interest and charges were frozen. (Unless the IVA terms are not met then these can be added back on).

Ms E could now see light at the end of the tunnel and had no assets that the supervisor would consider liquidating so she now had peace of mind.

To be suitable for an IVA you would need to meet the following criteria;

- Unsecured debt must be £12,500 or over
- You must have a monthly disposable income of £200 or greater
- You must live in England, Wales or Northern Ireland
- You must be in full time employment

Benefits Of An IVA

Your IVA would be legally binding meaning no further charges or interest could be added. It also means your creditors are not able to change their mind if they agree to your proposal

You will only be asked to make affordable repayments

An IVA enables a professional person (doctor, accountant, solicitor etc) to continue to practice whilst resolving their debt problem

Bankruptcy may affect their professional status. You may have to check your employment contract to ensure you can enter an IVA

You are likely to be able to keep your home within an IVA, usually
the Insolvency Practitioner will only be interested in any equity

You would face fewer credit restrictions entering an IVA compared to bankruptcy

Negatives Of An IVA

Any available equity in your house or other asset would have to be released for your creditors

An IVA is legally binding so defaulting on the agreement would result in your IVA failing, which could mean your creditors will proceed with bankruptcy

Your income and expenditure will be reviewed on a frequent basis which can mean your monthly contribution could fluctuate up as well as down

Your IVA would be noted within your credit file and it would remain there until you complete the IVA, and for a year after that

An IVA usually lasts for 5 years, whereas Bankruptcy would only last for 1 year


Post a Comment