An IVA might help anyone who is experiencing problems clearing their debt. It is an especially tempting offer to households who are at risk of losing their house if they became bankrupt.
An IVA could help if;
Your lenders have not agreed to an informal debt management agreement
You formerly had an informal arrangement, but you could not adhere to its provisions.
You have so many creditors that an informal debt management arrangement would be impractical. You could be made bankrupt, alternatively you have already become bankrupt and you want to reverse that position. You previously had an informal arrangement, but you could not adhere toits provisions.
Your lenders have not accepted an informal debt management arrangement
You could be made bankrupt, or you have already become bankrupt and you want to reverse that situation.
You have so many creditors that an informal Debt Online agreement would be impractical.
You may have a start up business which you would be unable to keep operating if you became bankrupt. You would lose your job if you are made bankrupt, jobs such as solicitor, accountant, the armed forces, police. You have access to a significant amount of money but it is still inadequate to fully repay your loans. You want a formal arrangement with your creditors to accept that lump sum and write off the balance of what you owe.
You have equity in your house. You wont necessarily lose your house if, with the agreement of the IP and your creditors, it can be kept out of the Individual Voluntary Agreement. However, your lenders will normally want the maximum amount of the equity in your home as they can acquire. With an IVA you are less hampered restricted as with bankruptcy. For example, with an Individual Voluntary Agreement you are not obligated to inform your bank. Therefore, you will still be able to use your bank account.
And the disadvantages?
If you are unable to comply to the terms of your IVA, then the Insolvency Practitioner who is supervising your Individual Voluntary Agreement or your creditors, can petition for your bankruptcy.
If 75% of your creditors fail to acquiesce to your proposed Individual Voluntary Agreement (IVA) you are subsequently back to square one. It will be twelve months before you can make another IVA proposal. You should carefully prepare your paperwork.
If you are a mortgagee, it could be that under the terms of the IVA or Individual Voluntary Agreement you have to sell your house. An alternative method is to include a clause in your IVA where you have your house valued after an prearranged amount of time with a view to releasing the “equity” in your house at that time, to your creditors. Your creditors may agree to you paying monthly IVA instalments for an additional year to cover the amount of equity in your home.
If your financial position alters and you are unable to afford the repayments, unless your Insolvency Practitioner can encourageyour creditors to accept a revised agreement, your IVA will terminate. This can mean you are facing bankruptcy.