FinanceDogma – Finance, loans, creditcard and mortgages

March 30, 2010

What is an Individual Voluntary Arrangement?

Filed under: Finance — Tags: , — admin @ 11:09 am

An Individual Voluntary Arrangement, otherwise known abbreviated as an IVA, is a formal agreement between a person and their creditors where an arrangement is made in order for the debtor to be able to afford their monthly debt repayments. By instigating an IVA, reduced payments are made towards the total balance of the debt (which is usually a percentage of the monies owed) and the term for this is often over a five year period. After this time the debt is considered settled and the balance will be zero.

Most IVA agreements are based on a single and affordable monthly repayment over a term of 60 months. However every case is handled individually depending on each person’s circumstances and finances.

An IVA should not be confused with a ‘Debt Management Plan’ which is not legally binding. Before and IVA is granted, a set figure of repayment will be agreed between both parties and the agreement is legally binding. However as long as repayments are made on time for the duration of the term, the debtor will be free from all of the combined debts after this period regardless of how much has been paid.

On application of the IVA, the court will be notified for an Interim Order which, once in place, means that no creditor can take legal action against the debtor.

IVA’s are formal in nature so they need to be set up by a licensed professional such as a debt counselor or licensed Insolvency Practitioner (IP). It is the IP that presents the agreement to the creditors who then vote on whether the arrangement is acceptable. If the IVA is accepted, it becomes the role of the IP to supervise that particular IVA arrangement to ensure that the debtor adheres to the terms and conditions set out in it.

Powered by WordPress