The ultimate IVA definition is quite simply……
Individual Voluntary Arrangement.
An IVA’s full definition would of course be a little more in-depth than this, so here follows an IVA’s full definition.
The IVA, or individual Voluntary Arrangement to give it its full name, is a formal debt solution, aimed to assist people with an overburdening debt problem reach a ‘new agreement‘ with their creditors.
The IVA must be proposed and administerd by an Insolvency Practitioner.
A debtor’s circumstances must qualify them for an IVA before they could make a successful application, so read this article if you would like to see if you qualify for an IVA.
The IVA also acts as an alternative to bankruptcy.
The IVA has a predetermined term, which is usually 5 years, (though in the correct circumstances there could be just a Lump Sum payment as part of a Full and Final IVA), and during the IVA’s term the debtor agrees to repay to his creditors whatever he can afford, after his personal living expenses have been taken into account.
After successful completion of the IVA at the end of the arranged term, the debtor is considered debt free, even if he has not actually managed to repay the full outstanding debt to his creditors through the IVAs payments.
As previously mentioned, an IVA acts as an alternative to bankruptcy, and therefore and IVA offers professionals, whose profession would otherwise bar them from becoming bankrupt, an opportunity to deal with a severe debt problem.
There are other significant advantages that an IVA can offer to a debtor too.
For instance, if a debtor owns a property, the IVA will protect any of the debtors equity from his creditors, which the debtor may otherwise lose in the event of his bankruptcy.
An IVA will protect large assets such as vehicles, whereas they too might be lost to the Official Receiver.
Once an IVA has been agreed by all parties, the IVA becomes legally binding, which means the terms of the IVA are protected by law. Therefore, creditors are not allowed to try to change the terms of the IVA should they want to.
The terms of the IVA also requires a creditor to cease charging interest on all the debts in the IVA.
Creditors are also no longer allowed to increase the debt by adding late payment charges or fines either.
There are several standard terms that are included within the IVA proposal, one of which stops creditors from contacting the client once the arrangement has been agreed.
These are the key points of the IVA definition that highlight the advantages of the IVA from the point of view of the debtor.
However, there are also disadvantages with an IVA and it is important to full understand how these will affect the debtor before entering into an IVA.
My IVA adviser can offer you a free IVA consultation to enable you the opportunity to full explore the IVA option, in full confidentiality, before you commit to an IVA application.
To arrange an IVA consultation just call 0800 088 7503.
Read this article for a full breakdown of the IVA process.
Related Articles: