If your debt has grown beyond your control, an Individual Voluntary Arrangement, or IVA, could be the solution that saves you from bankruptcy. While there are advantages with an IVA, there are many disadvantages as well, so it’s best to investigate all of your options carefully before deciding on a plan.

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.

The insolvency practitioner will meet with your creditors and create a plan for your unsecured debt repayment. It is possible that the practitioner can get your creditors to agree to a plan that could erase up to 75% of your debt if more that 75% of your creditors will agree to the plan. Your insolvency practitioner will make the financial arrangements with your creditors, and will likely have to haggle to reach mutually agreeable terms. If the IVA is approved, you then make one monthly payment that will be split between your creditors. A portion of your monthly payment will also go to pay the insolvency practitioner’s fees.

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.

The disadvantages are that setting up and IVA through an insolvency practitioner is expensive, and other than bankruptcy, most other forms of debt solution cost less. Having your finances closely scrutinized for such a long period can also be difficult. Any extra income that comes your way will have to go toward your payments, including employment bonuses, tax repayment, and any inheritance. You will find yourself having to explain any unusual financial activity to your insolvency practitioner. If you fail the agreement, your only option may be bankruptcy.

An Individual Voluntary Arrangement, often referred to as an IVA, is a legal and binding agreement between you and your creditors (those to whom you owe money). Every month, you will make a payment of a set amount, for a period of up to five years. To determine what the set payment will be, the parties to the contract will review your financial situation as well as the total debt owed, and arrive at a number that the parties feel is fair. (more…)

With the present economic situation being unstable and the continuous increase on interest rates, individuals are faced with unimaginable debt and financial troubles. Debt is sweeping through the land searching for every financial resource it could take. For example, unsecured loans have a tendency to include terms that are very tight and can choke a debtor financially. (more…)