What is an Individual Voluntary Arrangement (IVA) and how does it work?
An IVA is a legally binding arrangement between the Debtor and the Creditor, designed to create alternative payment arrangements and avoid bankruptcy. An Insolvency Practitioner (IP) is the only person who can authorise an IVA, meaning that the individual cannot set one up themselves. Entering an IVA also means that the individual may continue to earn the same income. If an individual were to be made bankrupt, they may have difficulties in continuing to trade or continue being a director. In addition, depending on their professional qualifications, an individual may have difficulty with their professional body, such as being an accountant or solicitor. In such scenarios, an IVA may be a more appealing option.
How do IVA’s work?
The idea is for the individual to pay what they can afford over a set period, which must be approved and agreed upon by the creditors. Once the IVA has concluded, any remaining debt will be written off. It is important to note that the creditors must agree to the IVA terms; if they don’t believe that an IVA is the best course of action, they will reject and may propose modifications to the proposals. Additionally, if the individual fails to make the agreed monthly payments, the IP may fail the IVA and initiate bankruptcy proceedings.
