IVAs Do They Work For You?
An IVA or Individual Voluntary Agreement could assist anyone who is experiencing problems repaying their debt. It is an singularly alluring option to households who are at risk of losing their home if they were made bankrupt.
You could benefit from an IVA if;
Your lenders have not agreed to an informal debt management arrangement
You formerly had an informal arrangement, but you could not keep up with its provisions.
You are in debt to so many creditors that an informal debt management arrangement would not be practical. You are being made bankrupt, alternatively you are currently 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 peril of being made bankrupt, or you are currently bankrupt and you want to reverse that position.
You have so many creditors that an informal Debt Online agreement would be impractical.
You may have a start up business which you would be unable to keep running if you became bankrupt. You would be made redundant if you are made 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 lenders. You want a formal arrangement with your creditors to accept 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 lenders will usually want as much of the equity in your home as they can acquire. With an IVA you are less hampered restricted as with bankruptcy. For example, with an IVA you are not obliged to notify your bank. So you can still be able to use your bank account.
And the disadvantages?
If you are unable to keep to the conditions of your IVA, then the Insolvency Practitioner who is supervising your IVA or Individual Voluntary Agreement or your creditors, can petition for your bankruptcy.
If 75% of your lenders fail to agree to your proposed Individual Voluntary Agreement you are subsequently back to square one. It will be 12 months before you can make another IVA proposal. You need to get it right.
If you are a property holder, it could be that under the terms of the IVA you have to sell your house. An alternative approach is to include a clause in your IVA where you get your house valued after an prearranged amount of time with a view to releasing the “equity” in your house at that time, to your lenders. Your lenders 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 alters and you can’t afford the payments, unless your Insolvency Practitioner can convinceyour creditors to agree to a revised agreement, your IVA will end. This will mean you are facing bankruptcy.
Filed under: General Interest