Individual Voluntary Arrangement (IVA) Law
The law on Individual Voluntary Arrangements (IVA) is now firmly part of the range of remedies obtainable to someone with meaningful debt problems. An individual consumer, or self employed person, with unsecured debts – usually greater than at the minimum £12000 – has the right to apply for an IVA.
An IVA is basically a new contract between the debtor and creditors, organised by an Insolvency Practitioner which can be quite flexible to meet the individual circumstances of each case. The concept of an IVA was introduced under the Insolvency Act 1986 originally to help trades people resolve debt problems. Over the last 25 years a body of practice and case law has developed around the original legislation to provide us with the solution we have today. Approaching 50,000 consumers and self employed people took advantage of an IVA last year.
The main characteristics of an IVA are fairly straightforward. An IVA is a private arrangement between the debtor and creditors. No attendance at Court is required – unlike with bankruptcy. All unsecured debts, including tax and VAT can be included and are effectively consolidated into a single lump under the IVA. The law allows the Insolvency Practitioner a degree of latitude into how the IVA agreement is truly put together. The agreements are formal and legally binding and usually last for a fixed period of 60 months with a fixed monthly payment; however others have variable monthly payments or provide for a single lump sum only.
The Insolvency Practitioner must put together a detailed proposal to present to creditors to acquire approval for the IVA to go ahead. Under the IVA law and associated procedures once approved the debtor becomes legally protected from further creditor action – as long as the terms of the IVA are kept. The Insolvency Practitioner – acting as Supervisor of the arrangement – is legally responsible for ensuring that the debtor keeps to the arrangement; collecting and distributing the payments to creditors; making the creditors aware of any changes or breaches in addition as conducting annual reviews of the case to ensure compliance.
Once the IVA is satisfactorily completed the debtor is then formally released by the Insolvency Practitioner from any further obligation and any noticeable debt limitations are closest written off. clearly by entering into an IVA the debtor’s credit rating will be affected – usually for a period of 6 years from the date of entering into the IVA – however the assistance of having a single affordable monthly payment and removing the debt stress can more than outweigh the possible restriction of credit availability.
Under the IVA laws only a suitably qualified Insolvency Practitioner is able to put together and supervise an IVA. There are only a limited number of such individuals in the UK and they are all very heavily regulated by government and legislation. You should always satisfy yourself that you are dealing directly with a regulated company that directly employs the Insolvency Practitioner. Otherwise you may just be paying for something which doesn’t solve your debt problems.