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IVA stands for Individual Voluntary Arrangement.
An IVA is available if you live in England, Northern Ireland, or Wales. In Scotland an IVA is known as a Trust Deed.
An IVA is a formal agreement that you enter into with your creditors. Creditors, in financial terms, are persons or companies that you owe money to. An IVA agreement is an alternative to bankruptcy and enables someone who has financial difficulties to clear debts at a defined amount they can afford over a specific period. Your assets are protected if your creditors accept your IVA proposal.
An IVA must be arranged with a qualified person. They will typically be a qualified accountant or a solicitor/lawyer. The person who is legally allowed to deal with your debts and propose settlements is known as an insolvency practitioner.
An insolvency practitioner will act as your nominated representative. They will explain the pro’s & cons of entering into an IVA and will help you draft a proposal for your creditors that you are able to afford and continually maintain. They will negotiate (and renegotiate if necessary) with your creditors on your behalf to agree the amount you will need to repay.
A typical IVA usually last for 5 years (60 months). The rules are different if you own a property as you will be expected to relinquish some of the equity in your asset. If it is not possible to release equity then you will need to make a further 12 months’ worth of payments into your IVA, meaning the duration becomes 6 years (72 months).
All common types of debt can be included in an IVA. These include overdrafts, credit cards debts, personal loans, utility bills & arrears, store cards, catalogue debts and payday loans. Other secured debts (like mortgages) and some other debts (student loans, child support, fines) will have to be paid for outside of the IVA.
For a proposed IVA to be accepted, at least 75% (in financial value) of the creditors must accept your proposal. Once they have, it’s legally binding and they can’t pursue you any longer for any money or interest due.
It goes without saying that if you break the terms of the agreement that your creditors have a legally binding contract to be able to pursue you for the debt. It is paramount that you stick to the terms of the agreement.
An IVA is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. If your proposal if accepted, it is approved by the court and your creditors must stick to it by law. An IVA can be flexible to suit your specific requirements, but it can be expensive and there are risks that must be considered. You should always seek professional advice from a qualified expert.