Individual Voluntary Arrangement

The recent economic downturn has resulted in some changes to the law by the government and therefore Individual Voluntary Arrangement (IVA) was introduced as an alternative to bankruptcy. IVA does not carry any negative effects compared to bankruptcy. It is in fact a better way to deal with insolvency or personal debt issues.

An IVA, if drawn up properly, can help write off a personal debt by up to 60%-70% instantly. Insolvency practitioners are qualified specialists who are able to help in compiling individual voluntary arrangements and dealing with personal insolvency procedures.

Basically in an IVA, the whole amount of debt and the number of creditors will be merged into a single account altogether. A weekly or monthly expenses list will then be compiled accordingly to the client’s monthly income and expenses, and with the agreement of both the client and the creditors. Household bills which are part of the essential expenses will first be paid before proceeding to the creditors. The amount of money left will be used to reduce the remaining debts in which the rates have been lowered.

If all the procedures are done successfully, the total amount of debt will be reduced by 60% or more. An IVA will typically run for over five years, however will sometimes be altered depending on the agreements. In Scotland on the other hand, such arrangements are known as protected trust deeds and the term is usually three years, or can be more.

A client under an Individual voluntary arrangement is protected against the creditors by certain insolvency laws and creditors are not allowed to commit a certain number of things which include not being permitted to send the client letters, phone calls or contact the client in any way.

Applicants on IVA must meet certain qualifications or requirements before they are approved for the arrangement. They are required to have a verifiable source of income and an excess amount of monthly income over their expenditure in order to finance the repayments. Those who do not qualify for an IVA will very likely be able to qualify for similar debt management programs. You can consult an insolvency practitioner to get some practical IVA advice and learn more about the procedures.