subject: IVA's : getting out of debt wihtout going bankrupt [print this page] Debt management and personal finance issues have become burning issues because of the recession. At the end of November 2009 personal debt in the UK had risen by 0.7%compared to the same period in 2008 and had reached 1,459 bn. Whats more, the average UK household debt reached 57,888 by the end of Novemeber 2009. These figures suggest a sharp increase in the number of people who are comfronted with personal finance issues. This means more and more people will be using the various debt relief solutions available to them such as Individual Voluntary Agreement (IVA). An IVA has similar implications as a bankruptcy procedure, in that the debtor is placed on the Personal Insolvency Register. However unlike under a bankruptcy procedure, the debtor who undergoes an IVA remains able obtain credit, and trade. An Individual Voluntary Agreement or IVA is a debt management solution for individuals who wish to avoid bankruptcy. It consists in a legally binding agreement of up to five years between the debtor and the Insolvency Practitioner. To be elligible for an IVA, the debtor must comply to the following conidtions: they must have unsecured debts of over 15,000 owed to at least three different creditors, the debtor or their must have a source of income that comes from employment. However, an IVA procedure will only go through following the creditors meeting. During this meeting, the creditors to whom the debtor owes money study the IVA proposal. A vote is then taken by value; the Individual Voluntary Arrangement will only be approved if 75% in value vote in favour of the IVA. A second count will take place if any creditors voting are associated (family, business partners, friends) to the debtor. In this case, the IVA will be approved if 50% of the non-associated creditors in value approve of the Individual Voluntary Agreement Procedure. Once the IVA has been approved, all unsecured creditors are bound to it. Creditors that are bound by an Individual Voluntary Arrangement cannot take enforcement action to recover the debt. This means they cannot demand the repayment of the debt. The creditor that wants to request their debt to be paid must instead submit a claim in the IVA and the bill will consequently be paid by the Supervisor. The Individual Voluntary Arrangement fees are paid to Insolvency Practioner who then deposits them in the Insolvency Services Account. The Government will also levi an ad valorem (tax based on the value of the payement) of 17% after the first 2,000 have been deposited. Despite being as stigmatising for the debtor as a bankruptcy procedure (the debtor is placed on the Personal Insolvency Register), an IVA is the preffered solution when the debtor wants to avoid bankruptcy. It enables the debtor to carry on trading and obtaining credit. Furthermmore, under an Individual Voluntary Arrangement procedure, the debtor still has control over their home; whereas if they were to undergo a bankruptcy procedure, the debtors home would reside under the vest of a Trustee. However, only in the case that an IVA would be to fail (the debtor is unable to keep up with the repayments) would bankruptcy become a real possibility for the debtor.
IVA's : getting out of debt wihtout going bankrupt
By: Joel Desvignes
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