The Pros and Cons of an Individual Voluntary Arrangement (IVA)

The Pros:

• An IVA does not carry the same stigma that normally accompanies bankruptcy.
• An IVA is a private agreement with your creditors, and even though it will be listed on the IVA register held at the DTi, it will not be published in the press.
• An IVA allows a person to only repay what they can genuinely afford.
• During an IVA all creditors forfeit the right to be able to contact the debtor directly. All correspondence, including telephone calls, must be done through the Insolvency Practitioner.
• An IVA allows the debtor to reach an amicable agreement with their creditors, whilst allowing the debtor to participate in the assessment as to which assets should be made available to creditors. Each IVA is tailored to suit the debtor's personal circumstances. All this is providing the creditors are no worse off than if bankruptcy had taken place.
• An IVA will normally generate a higher return for the creditors compared with the return generated by the debtor's bankruptcy.
• Creditors can claim tax relief against bad debts just as with bankruptcy.
• An IVA protects the debtor against minority creditors who vote against the IVA, for as long as the required majority of 75% (in debt value) agree to the IVA, all of the creditors are bound by its terms.
• An IVA is a legally binding agreement, therefore, so long as the debtor fulfils the terms of the agreement, they will be debt free on the IVAs successful completion
• The debtor does not suffer the same restrictions imposed on bankrupts. For example, a debtor can still be a company director or in the armed forces.

The Cons:

• An IVA is only a suitable option when the debtor has at least £15,000 of unsecured debts.
• For the IVA to be considered approved, and therefore legally binding, a sizeable majority of the debt value (75%) must agree to accept the IVA proposal
• The home and assets of the debtor can still be at risk if the creditors decide not to exclude them from the IVA proposal.
• If the debtor fails to maintain the IVA payments, the creditors are at liberty to petition for the debtors' bankruptcy.
• IVAs are recorded in the DTi's IVA register and will appear on the debtors credit file. This is likely to effect an application for credit for upto 1 year after the successful completion of an IVA.

Call free on 0800 088 7502 to find out more about Individual Voluntary Arrangements (IVAs) or get help with applying for an Individual Voluntary Arrangement (IVA) by filling in the form below.