Individual Voluntary Arrangement
IVA - Individual Voluntary Arrangements
An IVA or individual voluntary arrangement in the United Kingdom is a formal and binding agreement that is arranged between the borrower and the county court. It is a managed payment plan that has to be drawn up and administered by a licensed Insolvency Practitioner (IP), that is designed to pay off your debts over a pre-detrmined time period, usually between three and five years. It is important to note that an IVA could damage your credit rating, and a fee will be charged by the IP).
To qualify for an IVA you must have a minimum of £15,000 outstanding debt with 5 or more creditors, you must also have at least £200 per month to pay into the IVA. For the IVA to be approved you must have at least 75% agreement from your creditors (this is money value not number of lenders). Once accepted you could get up to 75% of your debt written off and the interest frozen on the remainder, your plan will usually run for a 5 year period.
The IP will charge you a fee but in most cases this will be deducted from your monthly payment into the IVA.You should check with the IP what their fees are and also what effect entering into an IVA will have on you credit rating, also because a fee will be charged you should explore all other options that may be open to you. A good place to start would be The Insolvency Service website, or your local Citizens Advice Bureau.
The Difference Between Bankruptcy and an IVA
When an IVA is drawn up, the IP will negotiate on your behalf as to what assets are included in the agreement. With bankruptcy, all assets are held by the appointed trustee and distributed amongst your creditors. You will also have many more restrictions placed upon you than with an IVA.
With bankruptcy, all your debts will be written off once you have been discharged. This could be as soon as 1 year. However, this will be evidence of the bankruptcy on your credit file which will hamper your borrowing capabilities for years to come. Bankruptcy can also affect what you do for a living. An IVA will get your debts written off as well, usually after a period of 3 to 5 years. Unlike bankruptcy, you do not use your assets to pay the IVA, you use what spare income that you have.
Although both an IVA and bankruptcy are legally binding, an IVA can be kept more private whereas bankruptcy is publicly advertised.
What Is The Best Option For Me?
With a great number of options open to you each with their benefits and pitfalls it is hard to decide which one fits your needs best! That is why you should seek professional debt help and advice, by completing our short from below. One of our debt specialists will call you back within the hour and before you know it you will be on the road to being debt free. We can also arrange bad credit loans if consolidation is your best option.