What Is an IVA

Introduction to What is an IVA?

Many people often think that an IVA is basically bankruptcy. However, this is not true. In fact, an IVA is nothing like bankruptcy, they just both have the same purpose – to free people from overwhelming debt. Therefore, there is always the question of what an IVA is. An IVA, individual voluntary arrangement, is a more modern way of bankruptcy, or it can be even referred to as a more pleasant way of bankruptcy. Naturally, there is nothing pleasant about losing everything people own and have worked for for many years. Unfortunately, sometimes this is the only way to get out of debt and get a second chance. This famous second chance may not sound like much the first time people hear about it, but the reality is that we all do deserve a second chance, and an IVA provides people with this opportunity.

What is an IVA?

The individual voluntary arrangement (IVA) was first introduced in the year of 1986 with the idea of helping people in debt to overcome their financial difficulties and get back on their feet. The main difference between an IVA and bankruptcy is the fact that the IVA offers people an opportunity to solve their problems without losing any assets or possessions, such as houses, vehicles, jewellery and so on. An IVA is an arrangement between the people who owe money, or the debtors, and the creditors which is made in order to pay a percentage of the owed money back.

Although this might not sound very logical at first, the creditors are very likely to accept this kind of arrangement. The reason for this is the fact that the creditors are aware that their debtors sometimes simply cannot keep paying the repayments, and they will accept an IVA in order to get some money, rather than getting nothing at all. Most arrangements such as an IVA last for five years, after which the remaining debt is written off. During the five years, the debtors have to pay their creditors a fixed amount of money each month, in order for the IVA to be valid.

What are the Advantages and Disadvantages of an IVA?

There are many different advantages and disadvantages of an IVA, but it is fair to say that the advantages are far more important and appealing. For example, with an IVA in place, people will pay back only a certain percentage of their debt and their creditors will never call them again once the arrangement is in place. In addition to this, the fact that all interests on loans are frozen is very helpful, meaning that the debt will stop growing uncontrollably. An IVA is also completely private and no one has to know about the arrangement except the debtor and the creditor or creditors. When it comes to disadvantages, the main one is the fact that people should never miss out on payments of their debts after the IVA is in place. If this happens, the insolvency practitioner has a legal right to make the debtor bankrupt.