Since its conception in the 1980s, individual voluntary arrangements (IVAs) have been an increasingly popular option for individuals that have a debt mountain that they are finding difficult to climb. Initially, were set up to help businesses facing bankruptcy but they became popular with members of the public once their advantages became more widely known.
To avoid falling into bankruptcy, borrowers can set up an individual voluntary arrangement with their creditor(s). The agreement consists of organizing the return payment either over time or immediately of the owed sum in return for the debt to be written off. Payments can be made either in one lump sum or monthly at a minimum of around $300 a month for a period of a maximum of five years.
The benefits for taking up an individual voluntary arrangement with your creditors are vast. The reason more than 6000 people take up IVAs with their creditors every year is down to: protection against court action from your creditors, frozen interest and late payment fees, and a repaired credit rating once your debt is written off.
An IVA can be used to reduce all your unsecured debts. This includes things such as store cards, catalogues, credit cards, overdrafts, personal loans and business loans. This is no doubt that IVAs can work well, and few people would dismiss an option that could cut their debt by up to 75%, but they are not always the solution for everyone. For example, you have to be able to afford a lump sum payment and / or at least $300 a month. Lots of people faced with bankruptcy just can not afford that.
In order to set up an IVA, an insolvency practitioner must propose the agreement to your creditors; you are not able to propose it yourself. The charges that these insolvency practitioners charge you will vary, but most will take their fees from your monthly payments. It is always good practice to shop around for recommended insolvency practitioners as if up front payments are made and the agreement falls through then you have wasted money you have not got.
It is generally accepted that an individual must have debts of $20,000 or more in order to be able to take out an IVA through an insolvency practitioner. In order for the IVA to be completed and legally binding, 75% of the creditors of the individual’s debt must agree to the terms in the agreement. Even if the remaining 25% do not agree, they are still legally bound to the arrangement. If less than 75% of the creditors (in monetary terms) agree, then you may have to find other options or consider bankruptcy.
Read On : IVAs
Mail this post