How Do IVAs Work?
Individual Voluntary Arrangements, or IVAs as they are commonly known, were introduced as part of the 1986 Insolvency Act. They were designed as a method of helping people with sever debt problem to get out of the red without the need for bankruptcy. It is only in recent years however, as the debt crisis in the UK escalates, that they have become more common.
How do I get an IVA?
If you are in debt you should first consider all the options available to you to get out. Once you have looked at all the possibilities with a debt counsellor, if it is decided that an IVA is the best path to take then you need to see an Insolvency Practitioner.
The Insolvency Practitioner
The Insolvency Practitioner will come to speak to you to go through your debts. He or she will look at who you owe and how much and also try to ascertain why you owe the money. He or she will then look at which of your debts could be written off in accordance with the IVA. However it is down to the creditors (the people you owe) to agree to this.
Once the Insolvency Practitioner has worked out what could be cleared he or she will call a meeting with the creditors. This will usually be set up by the Insolvency Practitioner seeking assistance from the Courts. If the Court agrees with the Practitioner then the creditors will meet with him or her to discuss your debt.
The Insolvency Practitioner will have to present some documents to your creditors outlining what should be done. The creditors can of course refuse to wipe the debts.
The Creditors
If a number of creditors choose to clear your debt there is still a possibility that the application for an IVA could be turned down. In order to enter into an IVA at least 75% of your debt must be wiped. Therefore enough of your creditors must agree to take part.
If enough agree to enter into the IVA, thereby wiping 75% of your debt then the court will be informed and everyone will sign the legally binding agreement.
Once the IVA as begun, you must make the set payment each month to the Practitioner who will then pay a certain amount to each of the creditors.
After the IVA
Once the IVA is expired you will gain control back over your finances but you will still have notice of it on your credit file.
Credit files are vital as they affect your ability to get credit of any kind, whether it be a credit card or a mortgage. With the IVA on your file you may struggle to get credit in the future, despite it having expired. You should be aware of the implications of the IVA on your future.
If you are looking to enter into an IVA then seek personal advice from a debt counsellor or the Citizens Advice Bureau to find out whether it is really a necessary course of action. If so, once you've entered into it you must make the agreed payments each month.
