Individual voluntary arrangements (IVA)

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Individual voluntary arrangements (IVA)

Individual voluntary arrangements or IVA as it is generally known describes the agreement reached between an individual who has considerable unsecured debts which he or she is unable to pay and their creditors. When someone decides to sign an IVA they are embarking on a new agreement where they undertake to pay off all their outstanding debts incurred before the IVA was signed during a period lasting no more than five years.

Whilst the creditors are never to overwhelmed by the prospect of someone signing an IVA to stagger their debts over a long term, they are generally prepared to accept the situation knowing that at least their money will guaranteed and they will receive it eventually. When a person in dire financial straits decides to sing an IVA, the first step is to consult an insolvency practitioner. The role of an insolvency practitioner is to draw up the documentation that is necessary. They will also be called upon to act as a liaison between the creditors and the debtor. Choosing the correct insolvency practitioner is very important as not only do they represent the debtor when the IVA is being drawn up, but will also supervise the implementation of the agreement for the entire period that it runs.

The Individual voluntary arrangement is drawn up by the insolvency practitioner using information provided by the debtor. Needless to say, this information has to be totally accurate and correct, not only to the extent of the debts, but also to current and protracted income and each and every asset at the debtors disposal. Failure to disclose accurate information is a criminal offence. Assuming that the information gathered, the insolvency practitioner will draw up a proposal that will allow the debtor to meet his fiscal commitments over an agreed time scale, whilst ensuring that there will be sufficient funds left in the family kitty to allow a reasonable life style.

Many people who are in financial trouble shy away from signing any form of formal agreement, preferring to either bury their heads in the sand or negotiate their own payment plan. What they often fail to understand is that an IVA is there to protect them as much as it is their creditors. Once the agreement has been signed, its existence and its terms remain totally confidential. Once the agreement has been signed, creditors are forbidden by law to contact the debtor, take individual legal action against them or alter the terms of the agreement in any way.

In many ways, signing an individual voluntary arrangement is a lightweight alternative to declaring bankruptcy with none of the stigmas attached. However the debtor is not totally protected against being declared a bankrupt if they do not make every effort to honour the terms of the agreement that they signed. They will also be under the constant supervision of the insolvency practitioner during the course of the agreement, during which time they will also be disallowed from receiving any form of credit.

All in all, signing an IVA and sticking to it is as good a deal as can be expected both for the debtor and their creditors.