What are the advantages of an IVA?
January 14, 2020
Individual Voluntary Arrangements (IVAs) are formal insolvency procedures that allow you to deal with serious debt, and offer an alternative to bankruptcy for some people. They typically last for five or six years and need approval from at least 75% of creditors (by value of debt) in order to go ahead.
So what are the advantages of entering into an IVA, and could it be a good solution for you?
What are the benefits of an IVA?
Protects your home
An IVA typically requires you to release equity in your home if there is sufficient to make it worthwhile, but unlike bankruptcy, it doesn’t place the property at risk of being sold.
Single monthly payment
You make one monthly payment to the Individual Voluntary Arrangement – a far more manageable situation than paying each of your creditors individually.
Stops legal action by creditors
Your creditors are unable to take legal action against you whilst the IVA is in place, as long as you keep up with the repayments and meet all the pre-agreed requirements.
Interest is frozen
Interest and charges on the debts included in the IVA are frozen – an important benefit as the addition of charges and interest makes repayment almost impossible once you start to face financial difficulty.
No upfront fees
There are no fees to pay in advance with an IVA – they’re included in the monthly repayments.
An IVA can be a good alternative to bankruptcy, especially for homeowners.
Your repayment amount and financial situation is reviewed each year – if your financial situation has worsened, in-built flexibility means your repayments may be lowered.
IVAs are legally binding on all parties, so you have an achievable and fixed timescale for being debt-free.
No need to deal with creditors
Once the IVA is in place your creditors cannot communicate with you or chase you for payment – this can be a huge relief if you’ve faced relentless pressure.
Can be used by sole traders
IVAs can be used by sole traders as their business debts are also classed as personal debts.
Procedure not as public as bankruptcy
There’s no public advert placed in the Gazette as with bankruptcy, and you don’t need to tell your bank that you’ve entered an IVA so it shouldn’t affect your bank account.
Writes off debt after five or six years
You may be able to write off any debts that remain when the IVA ends – when an IVA is sanctioned, creditors understand that only a proportion of the money you owe will be paid back.
Clearly, there are numerous advantages of entering an IVA, and it can be a good solution if you have a regular income. It remains a serious step to take, however, and one that needs guidance and input from a licensed insolvency practitioner (IP).
Northern Ireland Debt Solutions can provide professional advice on Individual Voluntary Arrangements, and whether or not they would be a good option for you. Please contact one of our expert team to arrange a free same-day consultation.
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