Individual Voluntary Agreement UK: A Guide to Understanding the Process
Individual Voluntary Agreement or IVA is a legal agreement that enables individuals struggling with debt to pay back creditors over an agreed period of time. It’s a formal debt solution designed to help individuals avoid bankruptcy, which can be a daunting and stressful experience. In this article, we will provide you with a comprehensive guide to understanding IVA in the UK.
Who is eligible for an IVA?
An IVA is available for individuals living in the UK who have unmanageable debt and can`t pay back their creditors. To be eligible for an IVA, the individual must owe a minimum of £6,000 in debt to at least two creditors. Moreover, the individual must be able to afford to pay a certain amount towards their debt each month.
How does IVA work?
The IVA process begins with the debtor contacting an Insolvency Practitioner (IP) to help them in setting up the IVA. The IP will then review the debtor`s financial status and come up with a proposal to share with the creditors.
The proposal will include the amount the debtor can afford to pay back each month and the length of the IVA, usually five to six years. The creditors will then vote on the proposal, and if more than 75% of the creditors approve the proposal, the IVA will be accepted.
Once the IVA is accepted, the debtor is required to make regular payments to the IP, who will distribute the payments to the creditors. During the IVA period, the debtor will be protected from the creditors taking any legal action to recover the debt.
What are the advantages of an IVA?
One of the main advantages of an IVA is that it enables individuals to avoid bankruptcy. Bankruptcy can have long-lasting effects on the individual`s financial status, affecting their credit rating and possible future employment opportunities.
Moreover, an IVA allows individuals to pay back their debts in a manageable manner, without the added pressure of high-interest rates. Additionally, an IVA prevents any legal action taken against the individual by the creditors while the IVA is in place.
What are the disadvantages of an IVA?
One of the main disadvantages of an IVA is that it will affect the individual`s credit rating. The IVA will stay on the person`s credit file for six years and can negatively affect their ability to take out credit in the future.
Moreover, if the individual fails to make the agreed payments, the IVA can be terminated, and creditors can take legal action against the debtor. This can potentially lead to bankruptcy.
Conclusion
An Individual Voluntary Agreement (IVA) can be a useful solution for individuals facing unmanageable debt. It allows individuals to pay their debts in an affordable and manageable manner while avoiding bankruptcy. However, an IVA can have long-term consequences on the person`s credit rating. Therefore, it`s essential to seek professional advice before committing to an IVA.