Individual voluntary arrangements are often a debtor's last alternative before bankruptcy. (A person who has been declared bankrupt cannot hold certain jobs.) While the total fees are lower, the actual costs involved in applying for an IVA can run into several thousands of pounds and make this option appropriate if you have unsecured debts of $15,000 or more.
An IVA is a formal agreement between a person in debt and his or her creditors to pay off all or a percentage of the total money owed, usually over a 3 to 5 year period (30-60 months). Some IVAs are set up so that you can use a lump sum rather than monthly payments, of a mixture of the two, to pay creditors. Because in most cases you will be paying off only part of the total debt, the amount of the monthly payment is less than it would be on all that you owe.
A reduced payment is one of the advantages of a IVA. It takes some of the pressure off you and your money. At the end of the period when the IVA has been in effect, any unpaid debt remaining is written off by your creditors.
Because and IVA is a formal, legally binding agreement, you will need to find a licensed insolvency practitioner (typically an accountant or a solicitor) to draw up the document. (Look under 'insolvency' in your local phone directory, which will have a list for your area). All practitioners charge fees for their services in helping you to create individual voluntary arrangement. Some take their fee out of your monthly payments.
Others charge upfront fees. Regardless of how it is paid, this money will come out of you pocket. This licensed professional will help you pull together the documentation required of the IVA. These will include your bank statements, income using pay slips, assets (your property), liabilities (mortgage statements), other expenses and a statement explaining the reasons for your financial difficulty. The last item is very important. The likelihood of your creditors accepting your proposal will improve if the truthful reason for your financial problems is something the people evaluating the proposal can understand and empathise with.
The amount you will pay under the terms of you IVA will be based on your disposable income, and it should be an amount you can realistically pay each month. Once you and the insolvency practitioner determine this amount, the practitioner will draw up the IVA proposal, which you should read carefully and then sign.
If you have been trying on your own to reach an agreement with your creditors but have reached an impasse, then an IVA is probably your best option if you want to avoid the complications and costs of bankruptcy. Yes, it will cost you money, getting out of debt rarely does. However, you will have to deal with your insolvency practitioner instead of all your creditors.
For more information and detailed debt management advice visit Debt Management or try Financial Loans for general financial help and advice.
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