04 Dec 09 Learn why IVA debt is becoming popular

The IVA (Individual Voluntary Agreement) has been formulated as an alternative to bankruptcy. It is a way to manage your debt when you it becomes unmanageable.

IVA first came into existence in 1986 and was designed initially to prevent small businesses facing financial difficulties from going bankrupt. However, today IVA debt agreement can be availed if you are having unsecured debts in excess of 20,000 and you are living in Wales, England or N. Ireland.

An IVA debt agreement is legally binding contract which is set up through a county court and is between you and your Credit Card Company or bank. This agreement can be set up by an Insolvency Practitioner (IP) who will consider your overall assets and income to ascertain as to what you can pay each month and as initial lump sum.
The IP then makes a proposal for your creditors that show them the best payment plan which you can offer to them. After the proposal passes this stage, the IP applies to the county court for an interim order. With this order, creditors cant begin the bankruptcy proceedings or any other action without the courts permission.

This proposal is then sent to your creditors for their consideration. In order to get the IVA, 75 % of the creditors should agree to this proposal.

As an IVA debt agreement is determined “by the value”, if the company you owe the most money to, rejects this Proposal, then the IVA will not be granted.

Advantages of an IVA debt agreement:

- There is no work restriction on you.
- Your entire debt will remain frozen till you meet all the agreed payments. You will also stay protected from any action by the court and your creditors will not contact you for your debts.
- There is no requirement for selling your home.
- In case you can keep up with the plan and can re-mortgage your house for about 85 % of its value, the remaining unsecured debt which you cannot repay is written off.
- The IVA debt payments are actually based on your payment capacity.
- Once the creditors sign the IVA debt agreement, they are bound by its terms.