Many people who are in large amounts of debt are now considering what is known as an individual voluntary arrangement.
What is this Individual Voluntary Arrangement?
An individual voluntary arrangement is a debt solution which enables people with debts in excess of £5,000 to have their monthly bills heavily consolidated and up to 85% of their personal debts written off.
There have been high profile cases of individuals writing off enormous portions of their debt with an IVA, British actor Neil morrissey managed to relieve himself of huge amounts of debt, successfully avoiding bankruptcy and consolidating monthly bills to manageable repayment levels.
How are these arrangements supported by the government?
The insolvency act 1986 icontains legislation which makes facility for people in debt to avoid the perils of going bankrupt, within that legislation there was a legal framework for people with insolvency allowing them legal protections from creditors and court action, along with the time and space to renegotiate their debt repayments into a new arrangement which works better for them.
The government Individual voluntary arrangement has helped 10,000s of people become debt free and drastically improve their lives as a result.
So IVA’s can be considered “supported by the government” but are not strictly issued by the government, but they are supported by legislation passed through parliament and so it is recognized as a debt solution with legal powers.
So should I be considering one of these IVA Debt Arrangements?
One good way to determine if you should be considering an IVA is to first consider the pros and cons, there are many advantages to such an undertaking but also a few key disadvantage you may wish to consider, so read on to consider the IVA pros and the IVA cons.
Pros of an IVA
1. Consolidation of all your monthly bills into one low monthly repayment, meaning for example if you were paying out £850 per month towards your bills, if you take on an IVA you will more than likely be able to squeeze this monthly repayment into something more like £250 per month which for many is a much more manageable proposition
2. Protection from nagging from creditors and debt collection agencies as per the legislation, through the use of a legal injunction known as an ‘interim order’ which prevents debt collectors from excessively pursuing debt repayment, this is a major advantage for many individuals looking for debt relief.
3. Enormous portions of debt liability can be written off, in many cases up to 85% of the entirety of the debt, this can mean in more extreme cases say you have a debt of £500,000 then often you can write off in excess of £400,000 – £425,000 in debt, which most people would agree is an enormous relief of financial burden.
4. You can freeze interest and charges on existing debts, this can reduce the amount of debt to be repaid in total, helping clients to become debt free more easily.
With some of the key advantages of IVA’s mentioned above we will now mention some of the perceived disadvantages, for a full guide on the pros and cons of IVA’s see this page..
The cons of IVA’s (perceived disadvantages)
1. An IVA is a commitment that needs to be kept to, because if the repayment terms are broken the creditor will be legally entitled to petition for bankruptcy which could result in the person in debt becoming bankrupt. It is important to stick to the plan with an IVA.
2. You need to watch the expenses with an individual voluntary arrangement and you will be advised to do so by the insolvency practitioner, this is because overspending can put the monthly repayment at risk and increase the chances of taking out more credit which goes against the core purpose of the IVA to begin with.
3. The IVA can make it more awkward in some cases to obtain certain bank accounts should you need to open up a new account.
All in all the IVA is a useful financial solution for people in debt, people considering this as a solution need to think carefully before making a judgment on it.