IVAs / Individual Voluntary Arrangements
An Individual Voluntary Arrangement (or IVA) is a form of insolvency that is used as a last resort to avoid bankruptcy, when debts become simply unmanageable.
It has some features in common with debt management programmes in that a new repayment schedule is worked out with the creditors, but it has the crucial difference of being a legal process that is binding on all involved.
To take out an IVA you need to work with a certified insolvency practitioner, who will draw up a detailed outline of your current financial circumstances – income, outoings, assets, and debts. The courts will then use this outline to decide on an appropriate and affordable repayment plan, which if accepted by the creditors (or more accutately, providing none of them provide a compelling reason to reject it), takes on legal force.
This means that all debt recovery proceedings must cease, and providing you stick to the terms agreed, nothing else will happen.
At the end of the IVA period, usually 5 years, any remaining debt is written off and you will be officially debt free.
Freeze on Borrowing
During the term of the IVA, your financial options are strictly limited: you are not allowed to borrow any more money from any source, even if you could find a company willing to lend to you.
Further, if you fall behind in your payments, you will probably find that bankruptcy proceedings will quickly follow, as your creditors begin the fight to use any remaining assets to clear as much of their lending as possible.
Short of bankruptcy, an IVA is as black a mark on your credit file as you could imagine, and even when the IVA term is over, you will find it extremely difficult to get credit of any kind. However, if debts forced you into this situation in the first place, you may on balance feel that that’s no bad thing.
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