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Individual Voluntary Arrangement – IVA

An Individual Voluntary Arrangement (IVA) is a formal agreement between a person and their creditors. If a person cannot make their repayments in full but are able to pay something each month then an IVA proposal can be established. This proposal sets out exactly what the person will pay their creditors each month. This is normally over a period of five to six years.

IVAs can only be drafted by an Insolvency Practitioner (IP). What an IP will do is go over all your personal finances and calculate exactly how much a person can realistically pay each month. The period over which the IVA proposal covers, can be reduced if a lump sum can be raised through the sale of property of other assets.

Once the initial draft has been done, an Interim Order can be applied for. Whilst the Interim Order is in place a person’s creditors cannot take action against them without first approaching the Court. A hearing date will then be scheduled. During this session, creditors will be asked to vote on whether they agree with the IVA proposal. If over 75% of them agree the document will then become legally binding. Once a person has made all the payments set out in the IVA over the five or six year period, it is considered that all liabilities have been satisfied.

If a person is in debt it can be a fine line between what is most suitable for them between a Debt Management Plan and an IVA. If possible, it is preferable to put a person on a Debt Management Plan as an IVA is a lot more serious and will remain on their credit record.

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