| With levels of consumer debt in the UK now | | | | any material assets that could be used to pay off the |
| exceeding £1 trillion it is of perhaps no surprise | | | | debt. The first stage of the IVA sees a proposal being |
| that more and more people are facing up to major | | | | made to all of the creditors. For the IVA to progress at |
| financial difficulties. When a person finds that they can | | | | least seventy five percent of the creditors must agree |
| no longer keep up with their debt repayments one | | | | to it. |
| possible solution is an Individual Voluntary Arrangement | | | | Benefits and Drawbacks |
| (IVA). | | | | Individual Voluntary Arrangements are advantageous |
| Individual Voluntary Arrangements were introduced by | | | | to both debtors and creditors when compared to other |
| the UK government as part of the Insolvency Act | | | | debt solutions including bankruptcy and debt |
| 1986. They were designed to provide a viable | | | | management plans. Entering into an IVA offers a |
| alternative to bankruptcy for individuals and small | | | | number of benefits. As the IVA is a formal |
| businesses. The government was concerned that in | | | | arrangement you are protected from legal action and |
| many cases bankruptcy can be a counter productive | | | | given a guarantee that the terms of the IVA will be |
| step in which both debtors and creditors lose out. The | | | | adhered to. Firstly during the IVA all interest being |
| purpose of IVAs was to provide a better solution for | | | | charged on the debt is stopped as are all legal |
| all parties. | | | | proceedings including petitions for bankruptcy. |
| How does an IVA work? | | | | Additionally at the end of the IVA any remaining unpaid |
| An Individual Voluntary Arrangement is a formal | | | | debt is written off leaving the individual free of debt. |
| agreement which allows a person to clear their debts | | | | With an IVA it is possible that as much as two thirds |
| in a fixed period of time. A person entering into an IVA | | | | of the original debt will be written off. |
| has their debts consolidated into a single regular | | | | An IVA however is not suitable in all circumstances |
| monthly repayment. Typically repayments will be made | | | | and in pure financial terms a debtor without assets or |
| for a period of five years however there is a degree | | | | significant income would be better off applying for |
| of flexibility in this. The actual IVA agreement will vary | | | | bankruptcy. After the new Law on bankruptcy was |
| from case to case according to a number of factors | | | | passed under The Enterprise Act a first time |
| including income, expenditure, size of the unsecured | | | | bankruptcy now only lasts for one year with a |
| debt and the number of creditors. These factors are | | | | repayment period of 12 months to 36 months. In an |
| used are used to decide the length of the IVA and the | | | | IVA the repayment period lasts normally for 60 |
| size of the repayments. The amount of the IVA | | | | months so the debtor is committing to repay for a |
| repayment will be based on what the individual can | | | | longer period than would be the case in bankruptcy. |
| reasonably afford on their current income. Legally only | | | | Obviously many people will opt for an IVA to avoid the |
| a Licensed Insolvency Practitioner is authorised to | | | | social stigma of bankruptcy, however if the IVA |
| prepare and manage an IVA. | | | | creditors refuse to accept the proposed IVA then the |
| Qualifying Criteria | | | | debtor should look seriously at bankruptcy. |
| Although Individual Voluntary Arrangements offer a | | | | If you are having problems with debt then the first thing |
| large degree of flexibility they are not suitable for all | | | | you should do is to speak to an independent debt |
| situations and type of debt. For an IVA to be suitable | | | | advisor. There are many organisations that are able to |
| certain qualifying criteria will usually need to be met. To | | | | discuss your debt problems with you and suggest the |
| qualify for a person generally must have unsecured | | | | best way to overcome them. In most cases this |
| debts in excess of £15000. In addition to give the | | | | advice will be offered free of charge. Although they |
| greatest chance of the IVA being accepted it is | | | | provide a good solution to debt problems Individual |
| expected that the debts will be divided between more | | | | Voluntary Arrangements aren't suitable for everyone |
| than one creditor. It is also required that the person is in | | | | and so it important to get impartial advice before |
| employment and so has a regular income from which | | | | making a commitment. |
| to make the repayments. They should also not have | | | | |