In a discussion with one of the sponsors of PFStock, the topic of an Individual Voluntary Arrangement (IVA) was brought up. I was not familiar with IVAs, so I decided to do a little research into the topic. In the United Kingdom, when a person declares bankruptcy, the details of the bankruptcy are advertised in the local press.
Due to the Insolvency Act of 1986, individuals in the United Kingdom have an alternative if they wish to avoid bankruptcy. This option, called an Individual Voluntary Arrangement (IVA) , is an agreement between a debtor and creditors. The debtor agrees to pay a monthly sum, usually for 5 years, to their creditors through this arrangement. This sum is divided up between the creditors, who accept the sum in settlement of the amount owed.
The monthly payment is based on one's income and expenditure. In general, more than 75% (in value) of the creditors must agree in order for the IVA to be approved. A standing order authority (usually a company) will be set up to handle the payments.
An IVA might be suitable for people who cannot pay their debts. To read more about IVAs, I suggest the following website: Debt Advice Trust. The Debt Advice Trust is a not-for-profit charity in the UK with the aim of helping people get out of debt by giving free, impartial advice. The site has a forum and lots of in-depth FAQs on debt and staying debt-free.
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3 comments:
IVA's are a fair way of enabling people move from a position of serious debt and the likelihood of being made bankrupt and loosing their home, to paying back what they can afford, having their home protected, the letters and phone calls stopping from creditors and the prospect of in 5 years being debt free.
However, as more people are choosing this as a preferred debt solution creditors (banks, credit card companies, mortgage companies) are trying to put the breaks on and both reduce the number of IVA's they agree and the fees a debt company charges to manage the debt.
Watch this space as there is a battle looking between the big money brands and the big debt companies like Debt Free Direct, who are currently the UK's largest IVA company.
I would be interested to know what the States has as an alternative to Bankruptcy? Is it just more loans and debt management plans.
IVAs seem to be a fair way for a person who has gone bunkrupt to get rid of his debt without losing his property. Good that such organizations appear.
Its seems like to easy a solution.
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