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IVA and legal action

One of the real benefits to using an Individual Voluntary Arrangement is that it gives you a level of protection from being pursued through the courts for your debts. If your creditors agree to an IVA, and as long as you keep to the agreement (i.e. keep up with the payments agreed in it), they cannot then take any legal action against you regarding the debts concerned.

When you find yourself in the position where you basically can’t meet your debts any more, it can be a pretty frightening experience. The threat of legal action, repossession and bankruptcy can make it seem that you no longer have control over what happens in your life. IVAs are designed to help people in these positions to get their finances back under control, and one of the ways that they do this is to legally bind your creditors to prevent them from being able to put even more pressure on you.

Legal protection from creditors

An IVA is a legally binding contract between you and your creditors. Your Insolvency Practitioner will help you to work out what you should propose as part of an IVA, taking into consideration, not only your debts, but your income, plus any assets that you may have. The IP will then present the proposal to your creditors through the court system.

Your creditors will have the opportunity to consider your proposal and to vote on whether to accept it. If they do accept it, they are then legally bound to it, as are you. As long as you then stick to the arrangement, you are protected legally.

Having this legal protection can give you a sense of security as you move forward in getting on top of your financial situation. However, bear in mind that the contract also commits you to the responsibility for keeping up with the terms you agreed to as part of the IVA. For this reason you need to ensure that what you agree to is something that you can realistically afford to pay back. The legal status of an IVA is designed to create a balance between the responsibilities of both creditor and debtor.

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If you’d like more information on other sources of free debt help and advice you can visit MoneyHelper – an organisation, backed by government and set up to offer free and impartial advice to those in debt. - Click here to visit MoneyHelper