Individual Voluntary Arrangements (IVAs)
Individual Voluntary Arrangements can provide a solution if the level of debt is significant and the thought of bankruptcy is not your preferred route. In this case it may be possible to avoid bankruptcy if you can raise a sum of money that your creditors will agree to accept in full and final satisfaction of their debts.
In simple terms, IVAs are an arrangement between you and your creditors to repay the debt over a period of time – typically 5 years.
The minimum requirements for Individual Voluntary Arrangements are:
- At least £15,000.00 of unsecured debt
- At least £250.00 a month available for payment into the IVA
- Insufficient disposable income to pay existing credit agreements
Once an IVA has been agreed by your creditors, all interest and charges on your unsecured debts will be frozen.
Payments into IVAs are made on a regular basis and normally last for five years although it is possible if a lump sum payment can be raised to shorten the term.
Positives of Individual Voluntary Arrangements:
- It is a legally binding arrangement between you and your creditors. No further action can be taken against you by your creditors once the IVA is approved.
- It is an accepted format for dealing with debt and does not carry the stigma that is associated with bankruptcy.
- A business can continue to trade and generate income. Unlike bankruptcy, you can still be a company director or retain your professional status and there will be no publicity in your local paper.
- Creditors can claim tax relief against bad debts.
- As long as 75% of the creditors vote for the arrangement all other creditors are bound.
- Creditors acknowledge that they must accept a reduced sum.
Negatives of Individual Voluntary Arrangements:
- Really only suitable if you have at least £15,000.00 of unsecured debt.
- Creditors representing 75% of the value of money owed must agree to the proposal.
- IVAs usually last for five years.
- If the IVA should fail, you can still be made bankrupt.
- IVAs will appear on your credit file which could affect future credit.
If you think that an IVA is for you, complete the online online IVA application form or give us a call now on 0114 244 6200 to discuss.
Follow the links below for further detail on other debt options for sole traders and partnerships: