An IVA could help anyone who is having problems repaying their debt. It is an exceptionally alluring offer to households who are at risk of losing their home if they were made bankrupt.
An IVA can help you if;
Your lenders have not accepted an informal debt management arrangement
You formerly had an informal arrangement, but you could not adhere to its terms.
You are in debt to so many creditors that an informal debt management arrangement would not be practical. You could be made bankrupt, alternatively you are currently bankrupt and you want to reverse that position. You formerly had an informal arrangement, but you could not keep up withits provisions.
Your creditors have declined an informal debt management arrangement
You could be made bankrupt, alternatively you have already become bankrupt and you want to alter that situation.
You are in debt to so many creditors that an informal Debt Advice arrangement would not be practical.
You may have a start up business which you could not keep running if you became bankrupt. You would be made redundant if you became 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 completely repay your loans. You want a formal arrangement with your lenders to receive that lump sum and write off the balance of what you owe.
You have equity in your house. You will not necessarily lose your home if, with the agreement of the IP and your creditors, it can be kept out of the Individual Voluntary Agreement. However, your creditors will usually want the maximum amount of the equity in your house as they can get. With an IVA you are not as hampered restricted than with bankruptcy. For example, with an IVA you are not obligated to notify your bank. So you can still be able to use your bank account.
The Disadvantages of an IVA
If you fail to keep to the terms of your IVA, then the Insolvency Practitioner who is supervising your IVA or Individual Voluntary Agreement or your lenders, can ask for your bankruptcy.
If three quarters of your lenders refuse to acquiesce to your proposed IVA you are effectively back to where you started. It will be 12 months before you can make another IVA proposal. You should carefully consider your proposal.
If you are a property holder, it could be that under the terms of the IVA you have to sell your house. An alternative approach is to include a clause in your IVA where you have your house valued after an prearranged time frame with the aim of releasing the “equity” in your property at that time, to your lenders. 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 changes and you are unable to afford the repayments, unless your Insolvency Practitioner can persuadeyour creditors to accept a revised agreement, your IVA will terminate. This will mean you are facing bankruptcy.
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