Depending on your circumstances, and Individual Voluntary Arrangement, or IVA, could be the best solution to your debt and keep you from bankruptcy. IVA’s have many advantages for a debtor, but there are disadvantages as well which can be hindering, so it is best to research all possible debt solutions.
To enter into an IVA, you must owe creditors at least 15,000. You must also have an income that allows you to contribute monthly to your debt after any essential bills have been paid. Without this ability, bankruptcy may be your only option. You must use an insolvency practitioner to arrange the IVA with your creditors, but the plan can give your up to 60 months to repay your debt.
An insolvency practitioner will set up a meeting with your creditors and devise a plan for the repayment of your debt. Often, an insolvency practitioner can convince your creditors to accept a plan that erases up to three quarters of your debt. For the agreement to become binding, more than 75% of your creditors must agree to the plan. The first proposal is usually declined, and the practitioner will have to find a solution that the creditors will accept. Upon approval, you will then make a monthly payment to be divided amongst the creditors, with a portion going to pay the insolvency practitioner’s fee.
The advantages of an IVA can be numerous. During an IVA, you are not in danger of losing your home, your amount of debt can be significantly reduced, interest charges are stopped, and the fees associated with an IVA are usually much less than those incurred by bankruptcy. The monthly payments you make will be based on your income, and change with your income as well. IVA’s also have less stigma than a bankruptcy, though both stay on a credit file for six years. With an IVA, the debtor is not prohibited from obtaining credit during the process.
One of the disadvantages of an IVA is the expense; while it’s less expensive than bankruptcy, the insolvency practitioner fees will be costly, and other forms of debt solution might be cheaper. Another problem that many people find difficult is that throughout the IVA, your finances are closely monitored. You will have to explain any unusual activity and any extra monies you receive during the period will have to go toward the IVA, including work bonuses and inheritances. If you should fail to meet the requirements of the agreement, you may be forced into bankruptcy.
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