When debts become overwhelming signing up for an Individual Voluntary Arrangement can seem like the ideal solution as an alternative to bankruptcy. IVA's are becoming increasingly popular with over 19,000 opting for an IVA over the first six months of the year with the average person owing in excess of £60,000.

An IVA, which normally last five years, is a legally binding agreement which is set up between yourself and your Creditors by an Insolvency Practitioner. (The Scottish equivalent of an IVA is a Standard Trust Deed). The Practitioner drafts up a Statement of Means and then a proposal is offered to your Creditors - 75% of who must agree to the proposals before the IVA comes into force. However, it is recognized that whilst people who find themselves with debt problems an IVA can offer them the chance to "wipe the slate clean" there are also disadvantages which must be considered before agreeing to an IVA and people must be aware of the full implications before committing themselves to an IVA.

• An Insolvency Practitioner will generally make an initial charge at the beginning of the process with a supervisory fee being charged for each year the contract is in place. These fees will vary from practitioner to practitioner and should be taken into account when you are considering an IVA.
• There is normally a charge upfront by the Insolvency Practitioner to arrange the IVA which is non refundable should the IVA not be agreed.
• An IVA is usually only suitable if the debtor has unsecured debts of £15,000 or can make regular monthly payments of £160 or more.
• The proposal must be agreed by Creditors representing at least 75% of the value of the money owed, as well as a simple majority.
• Creditors may refuse to accept an agreement if they believe repayments are likely to be less than 25p for every pound you owe.
• IVAs usually last for five years and are recorded in a public register and will automatically appear on your credit file which could affect any future applications for credit.
• Your home and assets can still be at risk if the creditors decide not to exclude them. If you are a homeowner there may well be a clause in the IVA that your property can be valued towards the end of the arrangement whereby the increase in equity can be seen as an asset.
• Should the IVA fail you can still be made bankrupt and if this is the case, the costs of the IVA will be added to your debts.
• IVAs are unsuitable for people on low incomes as the monthly repayments are often beyond their means.
• There is also the danger that many creditors now believe that the amount offered by an IVA is too low which will lead to an increase in the amount the debtor has to repay.
• You cannot apply for any credit during the period of the IVA contract.

There are few options available to people with serious debt problems but one solution is to contact a debt management company and this is where EuroDebt can help you overcome your debt problems. EuroDebt is one of the largest and most experienced Debt Management Companies in the UK, our service is totally confidential, contact us now for more details on how we can help you.

Back to Main News Page