Affordable Mortgages

Debt Advice - IVAs

In tough economic times, many have trouble keeping up with monthly obligations. For those who feel they are drowning in consumer debt, there is help. Individual voluntary arrangements, also known as IVAs, are a legal way to help people out from under the burden of consumer credit. The process is overseen by an insolvency practitioner and usually results in a better deal than borrowers would get by declaring bankruptcy.

Individual voluntary arrangements can reduce debt up to 75%, since the minimum most creditors approve for an Individual voluntary arrangement is 25 pence on the pound. The agreement is beneficial for borrowers, because it reduces the debt to an affordable level and is preferable to declaring bankruptcy. The agreement is also attractive to debtors, since they will often be able to recoup more of outstanding balances than they would with a bankruptcy agreement.

How is it Done?
An individual voluntary arrangement is initiated through an insolvency practitioner, who approaches the creditors with the request. The creditors gather for a meeting to determine whether the individual voluntary arrangement will be acceptable to them. Borrowers must have at least 75% of the creditors vote in favour of the individual voluntary arrangement in order for it to become a legally binding contract. When individual voluntary arrangements are not approved, the person will often have declare bankruptcy.

What is the Cost?
There is a cost for individual voluntary arrangements, to pay the insolvency practitioner for his services. The amount varies from company to company, The fees are collected as part of the monthly payment to the creditors, so the individual does not have to come up with a large lump sum before proceeding with an individual voluntary arrangement.

Before you are eligible for an individual voluntary arrangement, you must provide your insolvency practitioner with a complete breakdown of your income and expenditures. The insolvency practitioner will then determine the payment schedule based on these figures. Additional income, such as overtime payments, may be split equally between the borrower and the creditors. The average time it takes to pay off individual voluntary arrangements is five years. Interest is not charged during this time, which lowers the average monthly payment considerably.

Advantages and Disadvantages
There are advantages and disadvantages to individual voluntary arrangements. The advantages include:

• Affordability – Individual voluntary arrangements can reduce the debt to an affordable monthly payment
• Cost – Individual voluntary arrangements tend to cost less than bankruptcies.
• Home – Most people with individual voluntary arrangements are able to keep their home.

 

The disadvantages of individual voluntary arrangements include:

• Credit – Although some believe that individual voluntary arrangements are looked upon more favorably in a credit history, they can be nearly as detrimental as bankruptcies, and will remain on your credit file for upto 6 years after completion.
• Mortgages - Obtaining a mortgage whilst in an IVA can be more difficult - if you need help in this area please see our IVA Mortgage page
• Time – Individual voluntary arrangements generally take longer to complete, usually up to five years.
• Initiation – Creditors must agree to the terms of individual voluntary arrangements. If they don't, bankruptcy may often become inevitable.

 

If you believe an IVA / individual voluntary arrangements are the right course for you, we can refer you to a local ethical specialist for this service.