Individual Voluntary Arrangements (IVAs) are designed for people who have personal debts that they cannot manage the repayments for. In general, IVAs are pretty flexible, but they are typically used for people (not companies) with debts totalling at least around £12,000 and where the debt is owed to at least three different lenders.
The type of debt that you have is also a factor in whether or not an IVA will be applicable to you. IVAs are used for unsecured debts, i.e. debts that are not secured using an asset. Examples of secured debt are mortgages or loans secured on property you own such as a car, and so these are not the types of debt that an IVA is for. Examples of debts for which an IVA does apply therefore, are consumer debts such as credit cards and unsecured loans.
Having debts that you are struggling with does not necessarily mean that the best way forward is an IVA. If you’re in this situation you really need to get the advice of an expert to work out which option will be most effective. Debt management programs can help, as can consolidation in certain circumstances. Getting help in terms of mediation between you and your creditors can also take off considerable amounts of pressure.
If your debts are out of control to the point where you are worried about bankruptcy, you will need to speak to a professional such as an Insolvency Practitioner. It may indeed be the case that you will be able to try for an IVA in order to avoid bankruptcy.
Whether or not you actually manage to proceed with an IVA is also dependent on a number of factors. Together with your IP, you will work out a plan in terms of what payments you think you can realistically make. This will then be put to your creditors through the legal system, and they will meet and then vote on whether or not to accept it.
If the creditors (or enough of a majority) agree to accept the proposal, the IVA will go ahead. Providing you keep to the arrangement, once the term is over any outstanding debts involved in the agreement will be regarded as settled. This means that you genuinely can work towards being free from the debts concerned and look forward to a more secure financial state.
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