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An introduction to the IVA

This brief introduction to Individual Voluntary Arrangements, should give you some idea of what the process actually involves. You may have heard the term IVA and not known that it stands for Individual Voluntary Arrangements. There have been quite a few advertisements on the television regarding IVAs, but they are short and rather cryptic, leaving people wondering just exactly what it means.

An Alternative to Bankruptcy

An individual voluntary arrangement is a legally binding agreement that was introduced by the British government as an alternative for those people with more than fifteen thousand pounds worth of debts who might otherwise have filed for bankruptcy. The amount of debt in the population has risen considerably since the late nineteen nineties and so had the number of people who filed for bankruptcy. When someone files for bankruptcy each case results in a considerable amount of money in court costs, and IVAs were seen by the government as a cheaper and less traumatic experience than bankruptcy.

If you think that an IVA would be appropriate for your situation then you need to contact an insolvency practitioner who will be able to tell you whether an arrangement is the way forward for you. The practitioner will want to see a breakdown of your finances so that he or she can draw up a document detailing how much each of your creditors will be paid each month, and what part of the debt may be written off. Once a document is drawn up, you and your insolvency practitioner will then meet with your creditors to see whether they will agree to the arrangement. Providing at least seventy five percent or three out of four of your creditors agree to the arrangement, and then the others have to go along with it.

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The Arrangement

Once the arrangement is in place you will make a monthly payment to your insolvency practitioner, who will take his or her monthly fee and then divide the rest of the agreed sum of money between your creditors. If you are a home owner than at the end of the first two years of the arrangement, you may be required to release some of the equity from your home to cover the debt. Not all arrangements include this clause. If you are concerned about your home then you need to check whether it includes the equity in your home at the outset. Providing everything goes as planned and you keep up with the payments you should be debt free at the end of five years, anything left owing at the end of that period is written off.