Get answers to some common questions on IVA
If you are facing difficulty to repay the owed amount, then an IVA (Individual Voluntary Arrangement) may be the right option for you. Debts are legally written off with the help of this arrangement. It can be considered as an alternative to bankruptcy. Read on to know about IVA and get answers to some frequently asked questions on Individual Voluntary Arrangement.
- What is meant by an Individual Voluntary Arrangement?
An Individual Voluntary Arrangement can be defined as a legally binding agreement between a creditor and a debtor. By obtaining this agreement, a debtor can become debt free by paying less than what he/she owes to the creditors. It may consist of 60 monthly payments, a one-time payment or both. The creditors accept the amount as full and final settlement. Usually, the creditors receive at least 25% of the outstanding debt amount.
- How can you take help of an IVA?
In order to qualify for an IVA, you need to be a resident of England, Wales or Northern Ireland and should owe more than £15,000 to more than 3 creditors. In addition, you should have a monthly income that is not dependent on benefits.
- What type of debts can you include in an IVA?
You can include your unsecured debts (such as, your personal loans, bank overdrafts, outstanding VAT, credit or store cards, outstanding Inland Revenue debts, etc.) in an Individual Voluntary Arrangement. However, you cannot include secured debts (such as, mortgages) along with speeding fines, magistrate court fees, rental arrears, child maintenance arrears, etc. in an IVA.
- What happens if the creditors don’t agree to an IVA?
A debtor can obtain an Individual Voluntary Arrangement if only 75% of the creditors agree to the proposal. When 75% of the creditors agree, the arrangement becomes legally binding for the remaining 25% creditors as well. However, during the negotiation, the creditors can suggest certain modifications but it is solely up to you whether or not to agree to what they’ve proposed.
- Does it affect your credit rating?
An IVA may adversely affect your credit rating and decrease your score to some extent. However, the impact is much less as compared to filing a bankruptcy. When you enter an IVA, you will not be allowed to take additional unsecured credit but can continue using your prepaid cards.
- How does an IVA differ from filing a bankruptcy?
When you file a bankruptcy, usually all your assets are used to pay off what you owe to your creditors. In an Individual Voluntary Arrangement, your insolvency practitioner can negotiate on which assets to use in order to pay back the owed amount.
- What will happen if you default on your IVA payments?
If you default on your IVA payments, then the insolvency practitioner can appeal for your bankruptcy. At first, the insolvency practitioner will contact you and ask why you’ve stopped making payments; if you can’t give satisfactory reasons, then you’ll receive a certificate of default and it may lead to bankruptcy.
If you have any more questions on IVA, then solve your queries before entering into an IVA. You may take help of online forums to know more about Individual Voluntary Arrangement.