Implications Involved in an IVA

IVA or Individual Voluntary Arrangement is a formal agreement made between a debtor and their creditors. This arrangement is made in order to help the debtors repay debts that they would otherwise be unable to pay. Due to the formal nature of the IVA, they must be arranged through a licensed insolvency practitioner. An IVA can achieve the following:

• It is a legally binding method of freezing, and possibly reducing, the amount that the debtors pay back.
• It is a way to stop the future interest charges.
• It is also a way to reduce the monthly repayments.

Although an IVA can actually help the debtors to avoid various implications of bankruptcy, there are some crucial considerations that have to be kept in mind as well. As IVA can be a complex process, it is better to take professional help in order to clearly understand the implications involved in it.

The various IVA implications include:

• In order to qualify for taking an IVA, total unsecured debt must be over £17,500.
• At least 75% by value of the creditors must accept the IVA in order for it to proceed.
• An IVA will usually last for five years.
• In case the debtor fails to pay the monthly installments, the insolvency practitioner can fail the case and the creditors can subsequently begin the bankruptcy process against the respective debtor.
• There may a requirement to re-mortgage the home in order to release the equity proportion.
• IVA will affect the credit rating especially for a period of 6 years.
• You may be required to release any equity in your property and enter this into the IVA in the fourth or fifth year.
• The debtor cannot obtain credit without permission from the respective IVA supervisor.

An Individual Voluntary Arrangement can prove to be highly helpful in order to avoid the chances of getting bankrupt but as it is a legally binding contract, it is important to hire the professional debt services to ensure that the debtor is getting the best advice with regard to their circumstances.