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Why an IVA could be the solution for your financial situation
IVAs are a good alternative to bankruptcy for some individuals depending on their circumstances. This financial solution is a great option for people with unsecured debts they are struggling with.
Unsecured debt includes liabilities such as loans and credit cards, but not hire purchase which is a secured debt. Student loans, fines and child maintenance arrears cannot be included in an IVA.
For years, bankruptcy has been a common option for those that are deep in debt. However dependent on circumstances an IVA could be a better alternative for you. The decision to enter an IVA rests on a number of factors and is usually decided based upon this information.
To find out if you fit the criteria and if you are in financial difficulty, contact one of our friendly professional advisors. If you wish to go forward with an IVA you will be appointed a licensed insolvency practitioner (IP) who will act as supervisor.
Your supervisor creates a proposal regarding your IVA to agree with yourself and your creditors, those you owe money to. This proposal contains information on bills, assets, incomes, outgoings, circumstances leading to your current situation and how much you can afford to repay per month.
On a monthly basis, you will pay your monthly contribution to your supervisor. They will divide this up to be sent to your creditors pro rata, after taking out their fee.
Part of the criteria for the IVA is that you must owe money to at least 2 creditors as 75% of creditors by value must agree with the proposal before it can start. Also, you, the debtor, have to be able to afford the monthly repayment cost, after bills have been taken into account.
Once agreed with creditors, it is a formal legal agreement which binds both you and the creditors to the terms. If you break the terms you may be made bankrupt.
There are many benefits to an IVA, all of which probably point to why they have become so popular. These include:
- You usually get to keep your house and business, dependent on the equity in them and the circumstances.
- One of the key points of the proposal is to decide on an amount you can realistically afford per month. An IVA is a solution to your financial situation based on what you can afford to alleviate creditor pressure.
- Your employer doesn’t have to know about you being involved in an IVA. However, some professions (such as bank staff, qualified accountants etc.) may state that you have to inform them if you enter any type of insolvency.
- It prevents your creditors from putting further pressure on you and puts a stop to any legal action by them.
- The fees for your IP are included in your monthly repayment schedule removed as a surplus by them. As a result, you don’t have to pay any extra on what is agreed in the terms to cover these fees. The rest is divided up and passed on to creditors on a pro rata basis.
- At the end of the IVA term, usually 5 years, any monies still owing will be written off unless there is any extenuating circumstances.
Are you struggling financially? If you think an IVA could be the solution for you, get in touch with us. You can read more about an IVA here.