And IVA (Individual Voluntary Arrangement) is an alternative to bankruptcy for people living in the United Kingdom. An IVA offers an arrangement between the debtor and the company or financial institute from whom the debtor borrowed money.
All most all creditors prefer to use an IVA with a debtor rather than bankruptcy, as they will continue to receive money from the debtor, where as with bankruptcy they will not.
The IVA is based upon the debtors personal circumstances, and will last for the period of 5 years. The IVA (Individual Voluntary Arrangement) will be re-payed by the debtor but only using the amount of money each month that the debtor can afford to repay with out leaving him or her in poverty, as the cost of living is taken in to consideration.
The IVA is arranged through the courts via an Insolvency Practitioner and is arranged in accordance with the Insolvency Act 1986.
Although people wishing to arrange an IVA are in a better situation than those undertaking bankruptcy, it can still cause problems with the individuals credit rating. It will not stop the person from applying for credit and in most cases the person may still be able to receive credit, however the problem will arise with interest rates. Often if you have a good credit score you will pay lower interest rates on loans etc, where as a poorer credit score will mean you have to repay at a higher interest rate, which in the long term means the person will have to repay more. Both bankruptcy and an IVA will remain on a persons credit file for 6 years.
Anyone wishing to undertake an IVA should be aware that although the cost is not as high as that of bankruptcy, they will still incur some fees. Often any financial decision that has been made through any type of court system will cost money, which means for an individual with an overwhelming amount of unsecured loans and credit, they should consider how they will raise the money for these fees before considering the undertaking of an IVA.
An IVA is not a decision that should be taken lightly, it will impact on life for 6 years while it remains on the credit file. The immediate effect of an IVA will help anyone in severe financial constraints however it could cause problems for those looking for credit a few years later.
Only people in severe financial trouble should consider an IVA or bankruptcy.
