IVAs Do They Work For You?
An Individual Voluntary Agreement could aid anyone who is experiencing problems clearing their debt. It is an eminently attractive option to households who are at risk of losing their house if they became bankrupt.
An IVA can help you if;
Your lenders have not accepted an informal debt management agreement
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 be impractical. You are being made bankrupt, or you are currently bankrupt and you want to reverse that position. You have already had an informal arrangement, but you could not meetits provisions.
Your lenders have not agreed to an informal debt management agreement
You you are in danger of being made bankrupt, alternatively you are currently bankrupt and you want to reverse that position.
You are in debt to so many creditors that an informal Debt Advice agreement would be impractical.
You may have a start up company which you would be unable to keep operating 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 a significant amount of capital but it is still inadequate to fully repay your debts. You want a formal arrangement with your creditors to receive that lump sum and write off the balance of what you owe.
You have equity in your house. You will not necessarily lose your house if, with the agreement of the IP and your creditors, it can be kept out of the IVA or Individual Voluntary Agreement. However, your lenders will normally ask for the maximum amount of the equity in your home as they can acquire. With an IVA you are not as limited restricted as with bankruptcy. For example, with an Individual Voluntary Agreement you are not obligated to inform your bank. Therefore, you will still be able to use your bank account.
And the disadvantages?
If you are unable to keep to the terms of your IVA, then the Insolvency Practitioner who is supervising your IVA or your lenders, can ask for your bankruptcy.
If the vast majority of your creditors fail to agree to your proposed IVA or Individual Voluntary Agreement you are effectively back to square one. It will be 12 months before you can make another IVA proposal. You should carefully consider your offer.
If you are a mortgagee, it could be that under the terms of the IVA or Individual Voluntary Agreement you have to sell your house. An alternative method is to include a clause in your IVA where you get your house appraised after an prearranged time frame with a view to releasing the “equity” in your home at that time, to your lenders. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your financial position changes and you are unable to afford the repayments, unless your Insolvency Practitioner can coerceyour creditors to accept a revised contract, your IVA will terminate. This can mean you are facing bankruptcy.
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