IVA Information
IVAs, or Individual Voluntary Arrangements , were first introduced to the UK in 1986 under Part VIII of the Insolvency Act 1986. An IVA is formal proposal for repayment of debts that is presented to creditors via an Insolvency Practitioner. IVAs usually relate only to the claims of unsecured creditors, and do not affect the claims of secured creditors. However, some IVAs do also cover the rights of secured creditors.
IVAs are contractual arrangements with creditors. Because of this fact, they can be made as flexible as the debtor’s individual circumstances, and tailored to their unique requirements. They can be based on capital, income, third-party payments or a combination of all these factors.
IVAs as a solution to debt problems
IVAs are an important and very valuable alternative to bankruptcy . Often, creditors receive more money if they agree to an IVA than they would if the debtor simply filed for bankruptcy. Creditors vote to decide whether they will accept the IVA – if creditors totaling more than 75% of the total debt value are in favour of the IVA, the arrangement can be approved. If any of the creditors voting for the IVA are 'associates' (usually business associates, friends and family) then a second count is taken and 50% of non-associated creditors must approve the IVA before it can go ahead.
IVAs - UK facts and figures
In the UK, IVAs have become a very popular way for consumers with overwhelming debt problems to sort out their finances. Their appeal is obvious: they offer a viable alternative to bankruptcy, and with the help of a specialist debt advice organisation such as Debt Options, it’s easy to create and manage your own IVA arrangement.
With the tough economic conditions affecting the UK, IVAs have become much more prevalent. Figures were already soaring as the UK entered recession around the beginning of 2008, and they have continued to grow since then. During the third quarter of 2009, there were 12,225 IVAs in the UK, an increase of 1.3% on the previous quarter and a significant increase of nearly 21% on the same quarter in the previous year.
This could reflect the ongoing impact of the credit crunch, as consumers with debt problems find it much more difficult to open up new borrowing arrangements to pay off their existing debts.
If you’d like to talk through the pros and cons of an IVA, and decide whether it could be right for you, contact Debt Options , apply online or call us on [???????]; to discuss the options.
IVAs: the key advantages
IVAs have many advantages. While bankruptcy is advertised in local newspapers, an IVA is not, reducing the stigma that many people feel is associated with serious debt problems. An income-based IVA can last for up to five years, giving significant ‘breathing space’ for people to address their debt problems in a controlled and structured way.
Those who have IVAs are free to trade. Unlike bankrupts, who are obliged to declare the fact when they try to obtain credit, those with IVAs are not obliged to tell potential creditors that they have an IVA in place.
Another key advantage of the IVA is the control that it gives to the debtor over their home. With bankruptcy, equity in the debtor’s property may pass to the Trustee. In contrast, an IVA may exclude the debtor’s home from the arrangement altogether.
Finally, IVAs are often cheaper than bankruptcy in terms of the fees that debtors have to pay.
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