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Read About The Disadvantages Of An IVA
IVA Debt Solution
The IVA debt solution is something that is only available for UK residents. IVA stands for Individual Voluntary Arrangement, and it is a scheme that was set up by the government in 1986 to provide an alternative to becoming bankrupt for small businesses. The scheme has developed since then and is now regarded as a highly valuable and popular way to deal with very serious debt problems for individuals.
The equivalent of the IVA debt solution in the US would be debt settlement, which is a way of writing off a large proportion of unsecured debts. Debt settlement does not really exist in the UK because the IVA effectively does the same job, but arguably better. The fact that an IVA proposal is a formal and legally binding agreement gives it some advantages over other debt solutions.
IVA Debt Solution - Advantages
The key focus and main advantage of an IVA is that you just have to make affordable regular payments towards your debts for a fixed period of time, after which your remaining debts are written off. That is what allows this particular debt solution to be able to deal with really serious debts that are simply impossible to repay in full. They provide a way of wiping the slate clean without having to go through the trauma and stigma of bankruptcy.
Unlike other debt solutions such as debt management plans, an IVA proposal is a formal document for a legally binding agreement. There are several advantages in this. Firstly your creditors are legally not allowed to pursue you to recover their money and they are prohibited from taking legal action against you once the IVA debt solution is in place.
The other main advantage in this formality is that if 75% of your creditors vote in favour of the IVA, any creditors that do not want to take part are compelled to join in anyway. The 75% relates to the proportion of the debt, so if you had one creditor who was owed over 75% of the total debt, all you would need would be the agreement of that single creditor for the IVA to cover all your other debts too.
This can be very useful if you have a reluctant or difficult creditor who does not want to co-operate. With a debt management plan there would be nothing you could do to make any creditor join the plan if they did not wish to.
The IVA debt solution was created to provide an alternative to bankruptcy, and there are several advantages in using an individual voluntary agreement over filing for bankruptcy. The stigma is one of the main concerns people have with bankruptcy, and this is largely avoided with an IVA because it is a private arrangement, so it does not get published in a newspaper.
The other big concern with bankruptcy for homeowners is that you immediately lose control over all your assets, which can often mean selling off your home to raise money for your creditors. This is unlikely to happen under the IVA debt solution, though if there is equity in your property there may be a requirement to release it, depending what can be agreed with creditors.
IVA Debt Solution - Possible Disadvantages
While the legal aspect of an IVA has certain advantages, the possible down side is that you lose the flexibility that you would have with a different debt solution. If your circumstances changed you would be able to leave a debt management plan, but it is not that simple with an IVA. You would have to make a strong case to get your regular IVA payments reduced if your income went down, and if you got more money you would be expected to use at least some of it to pay towards your debts.
You need to meet certain criteria to get an IVA proposal, and these include having at least £15,000 worth of unsecured debt to a few different creditors. Unsecured debts include credit cards and personal loans and such like, but you will not be able to include any mortgage debt in an IVA, as that is a type of secured loan.
It is still possible that you may not be able to set up an IVA proposal if one or more creditors do not want to, and they are owed more than 25% of the debt.
An Individual voluntary arrangement normally lasts for five years, which is a lot longer than bankruptcy and usually longer than some other debt solutions. It is also still possible for you to be made bankrupt if you fail to keep up with the agreed payments on the arrangement.
IVA Debt Solution - Getting An IVA Proposal
If you decide that you would like to apply for an IVA proposal it makes good sense to apply to a few different companies before deciding who you want to look after you for the next five years. Comparing proposals and the way advisors deal with you is a good way of making sure you get the best value offer and find people you are happy to deal with.
All the best IVA providers have simple online forms on their websites, which you can complete very quickly and easily. They then get back in touch with you by telephone to get a bit more detailed information, which they then use to assess your situation and make a proposal. The main IVA page of this site has a list of some of the most reputable and effective IVA providers in the UK:
Go To The List of Recommended IVA Providers
