IVA The Pros And Cons
An Individual Voluntary Agreement could help anyone who is experiencing difficulties repaying their debt. It is an singularly persuasive offer to family’s who would risk losing their house if they were made bankrupt.
An IVA could help if;
Your creditors have already refused to accept an informal debt management agreement
You have already had an informal arrangement, but you could not keep up with its terms.
You have so many creditors that an informal debt management arrangement would be impractical. You could be made bankrupt, alternatively you have already become bankrupt and you want to reverse that position. You previously had an informal arrangement, but you could not keep up withits provisions.
Your creditors have declined an informal debt management arrangement
You you are in danger of being made bankrupt, or you are currently bankrupt and you want to alter that position.
You are in debt to so many creditors that an informal IVA agreement would not be practical.
You may have a small company which you would be unable to keep operating if you became bankrupt. You would be made redundant if you became bankrupt, jobs such as solicitor, accountant, the armed forces, police. You have access to a significant amount of money but it is still insufficient to fully repay your debts. You want a formal arrangement with your creditors to receive that lump sum and write off the balance of what you owe.
You have equity in your house. You wont necessarily lose your home if, with the agreement of the IP and your creditors, it can be kept out of the Individual Voluntary Agreement. However, your creditors will normally want as much of the equity in your home as they can acquire. With an IVA you are not as limited restricted as with bankruptcy. EG, with an IVA or Individual Voluntary Agreement you are not obligated to notify your building society. Therefore, you can still be able to use your bank account.
The Disadvantages of an IVA
If you are unable to comply to the terms of your IVA, then the Insolvency Practitioner who is supervising your IVA or your creditors, can ask for your bankruptcy.
If the vast majority of your creditors fail to agree to your proposed Individual Voluntary Agreement (IVA) you are subsequently back to square one. It will be 12 months before you can make another IVA proposal. You should carefully consider your proposal.
If you are a mortgagee, it could be that under the terms of the Individual Voluntary Agreement (IVA) you have to sell your house. An alternate method is to include a clause in your IVA whereby you have your home valued after an prearranged number of years with the aim of releasing the “equity” in your house at that time, to your creditors. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your money situation changes and you can’t afford the repayments, unless your Insolvency Practitioner can convinceyour creditors to agree to a revised arrangement, your IVA will end. This will mean you are facing bankruptcy.
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