What Is An IVA (Individual Voluntary Arrangement)?
IVA (Individual Voluntary Arrangement) is a process where people can create a legal document to pay off a portion of their debt. It is created when a person, family or business has created too much debt and it not able to pay it off.
The ability to pay the debt off in full is hard due to the climbing interest that is tacked on to teach monthly payment. Instead of filing for bankruptcy, this method is another route to take.
When bills have been collecting and creditors are contacting people, it may seem hard to keep up and catch up to what bills are owed. Without extra income coming in or the prospect of new income available, a person may wonder if they should claim bankruptcy or choose another method.
There are some advantages and disadvantages to using the IVA debt solution in a personal or business situation.
What Is The Process For An IVA?
IVA involves a legal process where a legal team submits a request to each bill collector. The request asks the creditor if the client can pay a percentage of what is owed. The other option is that the creditor would get nothing through the terms and practices of going bankrupt.
When the creditors have responded, the vote must be at least 75 percent in order to qualify. The customer would be bound to make payments over a period of 5 years as apposed to 4 years with a Trust Deed. The payments could include the fee for the service and the repayment to the debt owed. The money may not effect the property that may be owned or the business.
What Are The Advantages Of An IVA?
Advantages of the system could include the idea that there is no restriction on credit. A person is still allowed to apply for it and use it. While there are no limitations to use, a person may find that it is harder to get credit from reputable sources.
That may leave people stuck with poor creditors who rely on people with bad credit. A business person can still act as a director of a business even when they use this process to clear their debt. With the protection of bankruptcy a person is not able to direct their own company.
The payments may be flexible and not effect property. With some other arrangements in debt solution, the creditors will take property in order to clear their debt load. This solutions allows people to keep their assets and still pay off a portion of their credit remaining.
What Are The Disadvantages?
Some of the disadvantages may include the concept that it takes longer to pay off the monthly payments. The term is around five years instead of three with bankruptcy. The longer payments mean that the person is paying a monthly payment for a longer portion of time. If they payments are not made, then bankruptcy is the only solution. There is also no investigating as to whether or not someone has extra income or not.
Hidden assets cannot be found, because an investigation is not done into the person in detail.
One of the key points to think about is that credit can be restored faster and easier. Payments are made over a longer stretch of time, but they are helping to pay off the money that is owed. A person who is struggling with their debt load may want to seek financial help and advisement to see if the process is right for them.
Everyone will have their own situation and weighing the pros and cons may be the only solution. The idea of paying off a portion of money that is owed, could help someone feel better about their credit, knowing that they are taking responsibility for their actions and trying to maintain a credit report that is less damaged in the process.
How Are My Assets And My Credit Rating Affected With An IVA?
As long as a person is able and willing to pay off the monthly payments, it may be a great way to still maintain credit if needed and to keep assets. When a person owns a home, some cars and/or a business, they will want to keep their belongings. IVA is a way to keep assets and property while still filing for extra help with creditors. It is a less damaging way to secure finances and take a hold of a losing money situation.
An IVA (Individual Voluntary Arrangement) is a process that allows someone to help their credit by paying off a portion of their debt. Creditors will stop calling the customer and will agree to a lesser amount than is owing. The process will take up to five years to complete, but will have a lesser impact on credit reports than a typical bankrupt case.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here