IVAs – Are They Really A Government Debt Scheme?

Write off debt with a Government scheme

A lot of people ask us is an IVA a legitimate debt solution? Well to put minds at rest, here is some information below to clarify:

  • The IVA was established and governed by Part VIII of the Insolvency Act of 1986, and is presented to the creditors of the debtor via an Insolvency Practitioner, as a formal repayment proposal.
  • An individual voluntary arrangement (IVA) is a formal alternative used to avoid bankruptcy.
  • Insolvency Practitioners are regulated by the Insolvency Practitioners Association (IPA).
  • This IVA is a contractual arrangement with creditors, that can be flexible in the same way that an individual’s circumstances may be. The base of an IVA can be capital, third party payments, income or any combination of these.

More on the history of Individual Voluntary Arrangements here.

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How do I get my debts written off?

Check if you are eligible by using the IVA debt calculator here.

  1. Your advisor will run through your income and expenditure.
  2. Your advisor will work out allowances for your general daily spending and money to cover your bills.
  3. With the rest of the money, you will contribute this towards an IVA (minimum £70 per month).
  4. Using Government legislation, you will agree to pay a percentage of your debt off over 60 low monthly payments.
  5. At the end you are completely debt free, the rest of your debt will be totally written off.
  6. You are now debt free!

Government debt write off

After priority creditors and necessary expenses, a debtor can arrange an individual voluntary arrangement in this process, if sufficient money remains. In the case where serious problems exist, debtors may wish to consider a debt management plan after taking independent advice. Read about the advantages and disadvantages of IVA’s here.

The IVA proposal is discussed at a creditors’ meeting, called for creditors to take a decision. The return that is given to creditors is often higher, than what would have been received in the case of bankruptcy. A vote is taken based on value. For there to be approval of the arrangement, at least 75% in value of the creditors who vote at the meeting, whether in person or by proxy must agree. If any of the persons voting are in fact ‘associates’, such as friends, family or business associates, then there must be a second count. During this count, 50% of the non-associated creditors must give approval.

The original purpose of IVAs was to provide relief, to the debts that resulted due to business insolvency. Recently with the increasing levels of consumer debt, there have been many insolvent individuals who have non-business generated debts, and require the legal protection available within an IVA. People with large amounts of assets which they wish to protect, may express the most interest in IVAs. These types of assets include expensive cars and high-equity cars for example, and are not directly at risk under an IVA, as may be the case in a bankruptcy.

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