How Exactly Does An IVA Work?
In case your life ever takes a turn for the worse and leaves you with a financial crisis, while you owe a large amount of money, normally 15,000 USD or more, the best option to turn towards would be an IVA (Individual Voluntary Arrangement), which will make it possible to have a debt-free life again.
Since a bankruptcy could result in loss of assets, that is one of the main drawbacks of bankruptcy, IVAs are normally known to be a better substitute since the usual drawbacks a bankruptcy entails are not applicable. On the other hand, considering an IVA is a financial decision, and one needs to be fully aware of what is it all about before opting for it.
You can apply for an IVA only after you have consulted a debt adviser about your complete financial circumstances. This is done to ensure that no other better debt solution is out there, keeping your financial situation in mind. If the debt adviser thinks that an IVA is the perfect solution after the meeting, they consult with you and come up with a proposal to tell all the creditors exactly how much they should be expecting, in case of approval of the IVA.
You can then submit this proposal to all the creditors so that they get some time to go through it. After reviewing the proposal, the creditors will get a chance to vote in the favour of or against the IVA being approved. For your request to be approved, according to the value of the debt, you need to have 75% of the total voting creditors to be in the favour of this process.
If this whole process goes through smoothly, you will start with the actual IVA procedures. You will be paying a fixed amount of money every month to the insolvency practitioner. He/she will then pay the creditors dividends on this amount set according to the IVA proposal. This process normally goes on for five years.
During the term of this contract, you, along with all the creditors, would be bound under this legal agreement. The creditors will no longer have the right to pursue any form of legal action against you. The only way it is possible for them to take further legal action would be in case the terms of the contract are not followed. During the whole duration of the contract, the interest amount on your debt will be frozen unless the agreed terms state otherwise.
If you happen to own a house, you might be expected to give out a fixed portion of equity of your house ownership. This will be done in the 54th month of your payments and will be divided amongst the creditors according to the share of debt you hold against them.
Following your last payment made in the 60th month, the process would be ended, with any balance of debt left waived off legally, and you will be totally debt free. The record for the IVA will be held in your credit history for one year following its completion.
Since a bankruptcy could result in loss of assets, that is one of the main drawbacks of bankruptcy, IVAs are normally known to be a better substitute since the usual drawbacks a bankruptcy entails are not applicable. On the other hand, considering an IVA is a financial decision, and one needs to be fully aware of what is it all about before opting for it.
You can apply for an IVA only after you have consulted a debt adviser about your complete financial circumstances. This is done to ensure that no other better debt solution is out there, keeping your financial situation in mind. If the debt adviser thinks that an IVA is the perfect solution after the meeting, they consult with you and come up with a proposal to tell all the creditors exactly how much they should be expecting, in case of approval of the IVA.
You can then submit this proposal to all the creditors so that they get some time to go through it. After reviewing the proposal, the creditors will get a chance to vote in the favour of or against the IVA being approved. For your request to be approved, according to the value of the debt, you need to have 75% of the total voting creditors to be in the favour of this process.
If this whole process goes through smoothly, you will start with the actual IVA procedures. You will be paying a fixed amount of money every month to the insolvency practitioner. He/she will then pay the creditors dividends on this amount set according to the IVA proposal. This process normally goes on for five years.
During the term of this contract, you, along with all the creditors, would be bound under this legal agreement. The creditors will no longer have the right to pursue any form of legal action against you. The only way it is possible for them to take further legal action would be in case the terms of the contract are not followed. During the whole duration of the contract, the interest amount on your debt will be frozen unless the agreed terms state otherwise.
If you happen to own a house, you might be expected to give out a fixed portion of equity of your house ownership. This will be done in the 54th month of your payments and will be divided amongst the creditors according to the share of debt you hold against them.
Following your last payment made in the 60th month, the process would be ended, with any balance of debt left waived off legally, and you will be totally debt free. The record for the IVA will be held in your credit history for one year following its completion.
About the Author:
Edward Woodwards is a financial consultant. You can take his advice on individual voluntary arrangement on his recommended website http://www.iva.org.uk/iva-solutions.html
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