An Individual Voluntary Arrangement (IVA) is an alternative to declaring bankruptcy intended for individuals based in Britain. However, with the increasing worry of growing debt concerns, an IVA can look somewhat complicated and confusing on the face of it. That is why we have written this mini FAQ list, to help those who might be thinking about applying for an IVA to learn about the basics of IVAs and how they can help, or whether an alternative debt relief option could be a better idea instead.
So what is an IVA? It is a legally binding agreement existing between business and people that are owed money (creditors) and those who actually owe money (debtors). By getting an IVA, the two parties agree to a set of terms, so that the debtor can pay back the debts to their creditors, typically at a lower rate and over an agreed period of time, e.g. five years.
What are the benefits of IVAs to debtors and creditors? The big benefit to creditors is that they'll get some of their money repaid - it mightn't be all of it, but it will likely be more than if the debtor declares bankruptcy instead. For debtors, there's lots of benefits: bankruptcy can be avoided; they can work for a future that is free of debt; creditors will cease chasing the debtor for money and cannot threaten them with legal action.
Who are IVAs best suited to? An IVA might be preferred by a someone in debt who owes a large amount of money, usually greater than ?15,000. They typically only qualify if the debt is owed to 2 or more creditors too. In addition to this, it should be known that as well as the fact that IVAs are only applicable to the United Kingdom, they're really only applicable to residents in England, Wales and Northern Ireland. Scotland, meanwhile, has its own version of an IVA, known as a Scottish Trust Deed. Therefore, if an individual resides in Scotland, owes less than ?15k or only has one creditor, other debt relief options could be more suitable.
The IVA process: how does it work? In short, an IVA professional will be able to review and assess an individual's case and based on their particular situation - e.g. the amount owed, how much they can pay back, etc. - work out whether an IVA is suitable or maybe whether some other debt alternative is needed. If an IVA is indeed suitable then the IVA will be proposed to creditors. If they agree with the agreed terms of the IVA then the person can start the IVA and begin their way towards becoming debt-free.