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IVA's
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by: stickystebee
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An Individual Voluntary Arrangement (IVA) is a legal contract between creditors and debtors, and this arrangement is supervised by a licensed insolvency practitioner. The purpose of an IVA is that debtor and creditors reach a compromise, so that creditor gets back his funds and debtors do not have to face bankruptcy. An individual, trader or partners can enter an IVA contract with their creditors. There are various benefits of IVA – when a person enters this contract there is no fear of losing his property, and it will stop his creditors from demanding funds. Creditors stop further charges and will be prepared to write off a part of their debt, so effectively they will be ready to receive lesser payment. But creditors find this preferable, as IVA at least helps them recover substantial amount of their funds.
IVA is beneficial for debtors because it reduces the debts to an affordable level and helps to pay them off over a period of about three to five years. Debtors have to make a single monthly payment for the specified period, after which their remaining debt is written off. Moreover IVA is a private arrangement between the debtor and creditors, and the debtor can take a fresh mortgage if he wishes while in an IVA.
How does the IVA work? When a debtor decides to enter an IVA arrangement and this is usually possible if you have debts above £15,000, a proposal is submitted to the court, the aim being to get an interim order similar to debt management. The interim order issued by the court is useful to stop further action from the creditors till a meeting of creditors is held to discuss the terms of IVA. Creditors go through the proposal which is presented in a file and they are required to vote in favour or against the proposal. A file with details about the debtor, his financial condition, his creditors, and a statement of affairs with details about the debtor’s assets and liabilities and income and expenditure etc are circulated a fortnight or a month before the creditors meeting. Creditors have to vote at the meeting, and the proposal is accepted if there are 75% votes in favour. This percentage is in value, and once 75% vote in favour, the legal arrangement will be binding for all creditors, irrespective of whether they voted in favour or against, or did not vote.
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How does the IVA work? When a debtor decides to enter an IVA arrangement (usually after they have taken some form of debt advice) and this is usually possible if you have debts above £15,000, a proposal is submitted to the court, the aim being to get an interim order similar to debt management. The interim order issued by the court is useful to stop further action from the creditors till a meeting of creditors is held to discuss the terms of IVA. Creditors go through the proposal which is presented in a file and they are required to vote in favour or against the proposal.
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