What’s an IVA?
An IVA is an Individual Voluntary Arrangement between an individual and their creditors. It offers an alternative to bankruptcy by letting you come to an agreement with the people and firms you owe money to repay your debts over a given period of time, paying off a percentage of the outstanding total.
Generally speaking if you apply an IVA then you’ll pay a lump sum upfront and then a series of monthly payments. But at the moment the rules around IVA’s are pretty flexible. So you could negotiate a different arrangement with your creditors with the help of an experienced insolvency practitioner.
Like most loan repayment schemes, how much you pay back is calculated by your income versus your expenditure. When its agreed, the scheme basically becomes part of a legally binding contract.
If you’ve got an IVA you can then apply to the court for an interim order, which will stop your creditors forcing you into bankruptcy.
But there are a few things you have to remember…
First off, 75% plus of your creditors have to agree with the IVA. Secondly, if you miss a repayment, the arrangement becomes null and void. So you could be back at square one. Last, but not least, you need an income or enough assets for your creditors to feel comfortable enough that you can cover the repayments.
If you’re facing bankruptcy we’d advise you considering an IVA. You can avoid the stigma and potential penalties associated with becoming bankrupt. Your job won’t be jeopardized (a lot of firms now have a policy to either dismiss or not employ bankrupts). You get more control over your assets. And you don’t get lumbered with a lot of expenses involved with bankruptcy.
In spite of the pro’s though, there are always cons, which is an appropriate word considering the number of rogue traders out there who are cashing in on arranging unrealistic IVA’s.
Your dodgy IVA firm will charge you a fee to set up the repayment arrangement, which is probably beyond your means. And the fee itself probably won’t be small potatoes either.
With the current economic climate being what it is, bankruptcies are likely to increase. At the moment an average of 9,000 people are filing for it every quarter. If the doomsayers are right, then that number could increase.
If you’re in the situation where bankruptcy is looking like an attractive way out, take a breath before you act. Find a reputable insolvency practitioner and get some sound advice (initial consultations are generally free) before you decide what to do.
And if you do decide to set up an IVA, make sure you can afford the repayments before you agree anything.
If you want to know more check out www.r3.org.uk.
Filed under: Top Tips, Sound Advice
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