A short term IVA can be the right choice
Phillip Allen, Licensed Insolvency Practitioner at Debt Lifeboat
Media adverts for Individual Voluntary Arrangements (IVAs) generally refer to clearing your debts in full within five years. But for some people, a short-term IVA is a much better option.
It’s true that the five-year IVA has become an industry convention, partly driven by creditors’ concern that a short-term IVA is an attempt by the person in debt to 'get off lightly'.
But there can be good reasons for a short-term IVA, I recently set up an IVA on behalf of a young woman who had run up in excess of £50,000 in unsecured debts setting up a new business which failed. Not wishing to see her become bankrupt, her parents offered to pay creditors £30,000 from their savings. Net of costs, this would provide a return to creditors of around 50 pence in the pound. Faced with the alternative of a nil return in bankruptcy, her creditors voted in favour of the short-term IVA and the deal was concluded in just 12 weeks.
An upcoming retirement can also result in an IVA that is less than five years. For example, if someone was 61 years old with no prospect of working beyond normal retirement age, a four-year IVA would be viable. Lump sums from a voluntary redundancy package can also result in IVAs shorter than five years.
Creditors are happy with a short-term IVA if it is a genuine offer and affords a better return to creditors than bankruptcy.
For more information on a short term IVA, please call our Licensed Insolvency Practitioner Phillip Allen for a free consultation.
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