An Individual Voluntary Arrangement, often referred to as an IVA, is a legal and binding agreement between you and your creditors (those to whom you owe money). Every month, you will make a payment of a set amount, for a period of up to five years. To determine what the set payment will be, the parties to the contract will review your financial situation as well as the total debt owed, and arrive at a number that the parties feel is fair. If there is any outstanding debt after you have made all of the required payments, the creditor is to consider the debt settled and accept the outstanding amount as a write-off.
You need to be absolutely clear on what an IVA is before you become involved in one. You even need a special proctor called an insolvency practitioner before you can enter into the contract. An IVA is not just a simple way to deal with your debt. This is a clear contract that you form with your creditors. The insolvency practitioner mentioned above is a licensed professional who will take the time to see if an IVA is right for you.
The first step is to determine how much you will be able to pay each month, so the insolvency practitioner will ask you several questions related to your finances. Once he or she has a clear picture, a proposed agreement will be drawn up. You and the other parties to the agreement will need to carefully review this document before you sign. Once you have a proposal that all parties can agree to, an interim order is filed with the court. The interim order brings all of your creditors’ legal activities against you to a halt.
The process of voting will begin once the court files the interim order. Three-fourths of the vote need to come back positive in order for the IVA to enact. The creditors will meet with your insolvency practitioner for the voting process. However, the creditors will rarely show up in person. Usually, a fax is sent with their response: either they will agree or deny your claim. After the voting is complete, and you receive at least seventy five percent of the vote, you will be approved.
However, approval does not end the need for the insolvency practitioner. Their job also entails managing the IVA – ensuring that payments are made in a timely manner and in the amounts promised. They also make sure each creditor receives the amount due proportionately. Once the repayment terms have been completed, your debt is considered paid and the burden will be lifted. The fortunate aspect is that not only are people able to save their homes from foreclosure or prevent the loss of property, but up to 65% of the original debt can be written off with the use of an IVA. That money does not have to be repaid, as long as the terms of the IVA are met as promised.
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