Apr 8 2011
Individual Voluntary Arrangements – A Beginner’s Guide
An alternative to filing for bankruptcy, Individual Voluntary Arrangements (IVA) is a way out for all individuals reeling under mountains of debt. An IVA is a legal deal between an individual (the debtor) and his creditors supervised by a Licensed Insolvency Practitioner to reach a comprise position with regard to avoiding bankruptcy.
Established and governed by Part VIII of the Insolvency Act 1986, the IVA is a repayment proposal made via an Insolvency Practitioner to the creditors of the debtor. An act of the UK Parliament, the Insolvency Act of 1986 generally governs cases related to personal and company bankruptcy and Individual Voluntary Arrangements. It acts as a platform for all issues related to corporate and personal insolvency in the UK.
The IVAs were originally designed as a relief for issues related to business insolvency, but increasing consumer debts among UK citizens forced them to seek protection within IVA on a personal level. The IVA being a contractual agreement with the creditors has the flexibility to be based on an individual’s financial circumstances. They also allow people to steer away from no credit check payday loans and no credit check credit cards.
An IVA contract is prepared taking into consideration all of the debtor’s financial assets and capabilities. The debtor’s regular income, savings and investments, income from third parties as well as assets such as endowment policies are taken into account while preparing the Individual Voluntary Arrangements proposal. To get the IVA proposal approved, a meeting is arranged with the panel of creditors. A voting is done in which a minimum of 75% of the voters (in person or by proxy) must give their consent on the agreement to gain approval. But if any of the voters turn out be personal or professional associates of the debtor, then a second round of voting ensues and 50% of the non-associated creditors’ approval is sought.
Some of the main advantages of the Individual Voluntary Arrangements are that it protects a debtor from the stigma associated with bankruptcy and also improves his credit rating over time. It also allows a debtor to obtain credit unlike in bankruptcy. Whereas, filing for bankruptcy dissolves a company partnership and prevents a debtor from being the director of a company, IVA includes no such terms. Yet the greatest advantage of an IVA over bankruptcy is that the debtor can have control over his home even after signing up for an IVA proposal.
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