Writing Off Your Debts

If you have excessive debt, you may be looking for a practical and rational solution to get rid of them. One such solution is the IVA, or Individual Voluntary Arrangement. An IVA can help you in writing off your debts and, depending on your circumstances, even write a portion of them off. An IVA is a process in which you and your creditors agree to reduce monthly instalments for a period of time and after that period is over, any remaining balance is written off.

Some of the advantages of an IVA are:

An IVA is a confidential arrangement between you and your creditors. Only those people directly involved in the IVA need to know about it and your financial status.

Technically, an IVA does not prevent a debtor obtaining additional credit, although there is usually a clause in the arrangement preventing such an act without the approval of the IVA Supervisor.

An IVA will not dissolve business partnerships or prevent you from being a company director, unlike in bankruptcy.

An IVA is tailored to your individual situation to ensure that repayments are affordable and that all other living expenses have been taken into account.

IVAs are becoming more acceptable to creditors as they do not want their borrowers to file for bankruptcy, since this will often result in a minimal, if any, return on the debt. Once the IVA has been accepted at the Creditors’ Meeting, it becomes legally binding on all parties. Your creditors will not be allowed to contact you demanding payment outside the IVA and the IVA is structured such that all of your creditors get paid the same percentage of your debt due.  Although an IVA will initially have a negative impact on your credit file, successful completion will show future lenders a degree of commitment to managing your finances appropriately.

The biggest benefit of IVA over filing bankruptcy is the control the borrower has over his or her home. When filing bankruptcy, the assets of the borrower, including any equity, are entrusted to a Trustee in Bankruptcy, meaning that the Trustee can put it out for sale. While an IVA arrangement usually excludes the majority of assets altogether, it is usual for there to be a clause in the arrangement to remortgage in the final year to release any equity held in property. If the debtor is a tenant, or has negative/nil equity, this clause will be omitted. This information shows you how an IVA can be one of the best ways of Writing off Your Debts.