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Individual Voluntary Agreement - How They Work

By Steve Smith

Republish: EasyPublish™ Published: 27Sep2009 Word count: 425 Viewed: 236 time(s) Get Free Content For Your Site

It can be very difficult to juggle debts especially with the state of today's financial market it would appear that more people are struggling to pay off their debts. The average person has more debt than just what they have on their credit cards and even paying the minimum payment on that can take years to pay off. This can put people under a lot of stress especially when people cannot afford to make the agreed monthly payments.

There are numerous solutions around which many are unaware of, one of those is an IVA which stands for Individual Voluntary Agreement this is a legal binding agreement between the borrower to repay a portion of the debt owed this is supervised by a licence insolvency consultant.

An IVA is different to a consolidation loan although the concepts are similar, the difference is that payments are reduced dramatically because interest charges and the late payment charges are frozen which means you can no longer be chased or hassled for payments by the creditor.

When looking into an IVA there are a few things people need to be aware of, it can be available to anyone who has unsecured debts of £15,000 minimum. In the terms the debt will be paid over a number of 3 to 5 years. After that period the rest of the debt is written off.

The amount one would have to pay back is worked out by taking into account how much one is earning and what bills are being paid monthly. Not everyone is entitled to an IVA for instance if the individual does not have a job or after bills there is no money left to play with they will not be entitled to an IVA.

An IVA is not the same as bankruptcy. Bankruptcy is and should be used as a last resort, it is purely for people who simply cannot afford to pay off their debts. It is possible to petition for one's own bankruptcy order but an order could also be applied by one's creditor. With an IVA you have more say on how one's assets are dealt with, obviously doing this in a responsible and satisfactory way with the creditors. It is also possible to keep one's bank account or one can still run a business which cannot be done if individuals opt for Bankruptcy.

Final comments

When the period of the IVA has finished and all the requirements have been adequately met and the debts have been cleared 70% of your debts could be removed.

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