For many people, the only way out of insurmountable debt is bankruptcy. In less serious cases however, a feasible alternative is to set up an Individual Voluntary Arrangement or IVA.
An IVA is designed to help people with £15,000 or more of unsecured debts, by setting up a meeting with those who are owed money to agree terms on paying off the arrears.
It’s important to note that IVAs must be set up by insolvency practitioners (IPs), usually accountants or lawyers. You can be directed to an IP by a debt counsellor who will guide you through the preliminary stages and paperwork.
In many cases it suits creditors to agree an IVA as it means they at least get some payment, where a bankruptcy would result in a far greater loss.
If an IVA can be secured, it will instantly wipe out massive amounts of debt in one swoop (often up to 65%), leaving you to pay the remainder in scheduled instalments.
Obviously, you must be able to meet the demands of paying these instalments, either using money or assets to set up an IVA or this might not be the solution you’re looking for.
For an IVA to be passed it requires 75% in value of those creditors who vote on the terms. The 75% relates only to those who actually vote by the deadline (the creditor meeting), but all will be bound by the terms of the arrangement whether they voted or not.
Interestingly, you can even apply for an IVA if you’ve been declared bankrupt by applying for what is known as a ‘Fast Track Voluntary Arrangement’.
This involves presenting your case to the Official Receiver who decides whether the creditors who own your debt would benefit more from an IVA than upholding a bankruptcy.
An IVA is certainly a healthy alternative to bankruptcy and offers the advantages of preserving your professional status and halting interest on your loan meaning your debts can’t grow any further.
Equally people who obtain an IVA will not lose their home or any other assets and have the power to make financial decisions that those who are declared bankrupt do not.
Typically, it will take approximately 6 weeks to actually have an IVA proposal agreed at the creditors meeting, although they can be processed in a shorter period of time if the case is very straightforward.
If you’re considering applying for an IVA then you can get the advice and guidance you need with free skilled debt advice.
Take a look at the categories to find out more about IVAs.