If you are permanent resident in the UK and having very serious financial hurdles, then you have a legal option to declare bankruptcy. However, you have another safe alternative which is Individual Voluntary Agreement or IVA. Let’s find out –what is an IVA?
Founded by the Insolvency Act 1986, IVA is a legal repayment agreement presented on behalf of a debtor to the creditor(s). Usually the term of agreement ends after 5 years or during which debtor expects to pay off excluding his living costs. If you want to deal with creditors without declaring bankruptcy, then IVA is one ultimate solution. An Insolvency Practitioner or court administrator oversees this agreement. It is governed by Insolvency Act Part VIII. Available in Wales, Northern Ireland and England, the Scotland residents can use Standard Trust Deed. IVA usually benefits those individuals who have regular income source and are experiencing financial problems.
How Does It Work?
In order to receive IVA, you have to appoint a recognized Insolvency Practitioner who will make financial proposals to submit to your creditors and the court. Thereafter, the court of law will issue interim order to the creditors for not taking any action against debtor.
In this agreement, you will have to pay off the debt at a certain percentage in installments per month. The amount of installment shall be calculated with the help of Insolvency Practitioner and will be based on your affordability.
With IVA, the returns are likely to be greater than proceedings in bankruptcy. Hence, it is acceptable to several creditors. But it is important that 75% of creditors should agree with it. Creditors reserve the rights to decline the proposal which pays below 20% to 25% of the due amount.
As compared to bankruptcy, IVA can be even more flexible for your financial conditions.You can keep controlling your business and running it until you pay off all the debts. You don’t have to sell out your property unlike in case of bankruptcy.According to the case, other assets are also considered. You may exclude your vehicle if you need it to commute to your workplace. Even when Order of Bankruptcy filed against you, it is still possible to make a proposal of IVA irrespective of potential difficulties in this procedure.
You can consider less formal plan for repayment or bankruptcy if you have Income Support. Call your Insolvency Practitioner immediately if you lose source of income or job because it is subject to conflict with fulfilling the IVA terms.
On the other side, if you have a membership to any company, then look for the organization where you can secure your membership to figure out how IVA contract may affect your official recognition.
During IVA agreement, you will not be allowed to use unsecured credit like personal loans or credit cards etc. On your credit file, a note will be added to notify money lenders. That note will stay for one year after completion of IVA agreement, on your credit file.
What If When IVA Completed?
After paying off all the stipulated debts to your creditors and completing your IVA agreement, Insolvency Practitioner will send you a Statement of Completion.