IVA
IVA, or Individual Voluntary Arrangement, is a fairly recently established piece of Government legislation that allows an individual debtor to avoid bankruptcy by arranging a repayment schedule with their creditors. The total amount repaid is usually a percentage of the total debt.
A licensed insolvency practitioner, who acts as the nominee to the debtor, and an intermediary between the debtor and the creditors, manages the IVA process.
An IVA is a legally binding formal arrangement, and is the repayment terms are fixed and cannot be changed by either the debtor or the creditors, as long as the financial situation of the debtor does not change dramatically. Interest is frozen, and creditors cannot add charges.
The basic criteria required to qualify for an IVA is as follows:
The debtor must have at least £12,000 of unsecured debts (usually £15,000+) split between a minimum of three creditors. The debtor must be in employment and have a monthly disposable income (monthly income less monthly expenditure, excluding unsecured loan repayments) of £200 minimum in order to afford the contributions. Despite advertising from some of the organisations offering IVAs, creditors will usually look to recoup at least 50% of the original amount borrowed, therefore, if the offer they receive is less than that amount, they may well reject the proposal. In order for the arrangement to succeed, 75% of the creditors (in terms of value of the overall debts) must agree to the proposal. If they do, the remaining creditors are bound by the arrangement.
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