That Payday Punch

Many people in the United Kingdom have begun taking advantage of the IVA (that is, the Individual Voluntary Arrangement) as an alternative to bankruptcy.

If you are looking for a debt solution or are trying to avoid bankruptcy, an IVA may be the right choice for you. In this article, we’ll go over the basics of what make up the arrangement, so you can decide for yourself which plan of action is best.

The IVA was created in 1986 by the Insolvency Act, which basically concerns matters pertaining to personal bankruptcy. It is a formal pay schedule for those in debt through the use of what is called an Insolvency Practitioner.

The Individual Voluntary Arrangement pay schedule is geared towards flexibility on the debtor’s part, and therefore can be based on income, personal circumstances, or even third party payments.

To begin an IVA, a meeting is called by creditors in which they vote on whether or not the arrangement is the proper course. If the decision goes through, they set up a payment plan with the person in debt, and work through any potential problems he or she might have. An important thing to note is that someone may apply for an Individual Voluntary Arrangement after they are bankrupt, as the two are not mutually exclusive.

Also keep in mind that if the IVA is approved, the person in debt can file with a court for annulment of the bankruptcy claim. In Scotland, there is a very similar process known as a Protected Trust Deed, in which the main difference is the three-year course rather than the IVA’s five years.

The role of the Insolvency Practitioner changes over the course of the payment plan. First, he or she acts as an advisor, giving the person in debt solutions that may help them make payments more easily. These typically take the form of mortgages, consolidation, and management.

If the IVA is chosen as the course of action, the practitioner becomes what is called a Nominee. He or she then helps the debtor create a proposal for the creditors, which typically includes what caused the debt and how it can be worked through. They then hold the meeting, and if the Individual Voluntary Arrangement is approved, he or she becomes the Supervisor, which involves obtaining reports for the creditors, monitoring the arrangement, and delivering payments. An in case you’re wondering what the cost of an IVA is, the answer in nothing, as fees come out of the debt so are effectively paid by the creditors.

Bare in mind that no debt solution should be entered into lightly and you always need to get professional advice. Hopefully from a charity.

This entry was posted on Saturday, January 23rd, 2010 at 5:37 pm and is filed under Credit Issues, Your Finance Resources. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.