What’s the Legal Position Relating to IVA’s?

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Individual Voluntary Arrangements were first introduced by the Insolvency Act 1986 as a means of individuals avoiding bankruptcy.

Consequently, whilst an IVA is still a form of insolvency, it can certainly help to avoid certain consequences such as unemployment, forced sales of properties (including the family home) and public scrutiny through media publications.

My contract of employment states that I can’t be made bankrupt and I’m in debt.

A lot of individuals are subject to certain clauses within their contract of employment and this is especially true for personnel such as the police service, armed forces, solicitors and accountants.  In cases such as these bankruptcy can led to unemployment since certain professions are effectively ‘forbidden’ from being made bankrupt – whether that be voluntarily or through creditors.

How does an IVA differ from bankruptcy?

An IVA differs from bankruptcy in that it doesn’t have to be formally declared to anyone.  This includes an individual’s employer or even their bank.  What’s more, it doesn’t have the same sanctions and so whilst it’s still a form of bankruptcy the consequences certainly aren’t as severe.

What are the legally binding benefits of an IVA?

There are several key benefits of entering into an IVA:

  • Unlike bankruptcy, an IVA isn’t published in the media.  The details merely appear on the Insolvency Register and this is unlikely to be checked by family members, friends or employers.
  • Once an IVA is entered into then creditors can no longer pursue you for the debt.  This means that all phone calls, correspondence and even home visits will cease with immediate effect.  For most, this is a massive advantage in itself.
  • An IVA has a set term, which is usually five years (or the equivalent of 60 months).  Therefore – and provided that monthly payments are made during this time – then creditors are unable to pursue you for any outstanding amount (including additional charges such as interest, late payment fees and so on).   This is a legal requirement of the IVA.
  • Once the IVA has been satisfied in full then any remaining balance will simply be written off, leaving you completely debt free.
  • All payments made under an IVA are based purely on affordability.  Your chosen insolvency practitioner will be able to assist you with this part of the process since he or she will sit down and discuss your finances in great detail before a monthly proposal is submitted to your creditors.  This puts you firmly in control of your finances and helps you regain peace of mind for the future.
  • Finally, an IVA will also protect your assets so, unlike bankruptcy, you won’t be forced to sell your home or sell any other possessions of value (such as the family car).

What are the requirements to enter into an IVA?

What is an IVA? To enter into an IVA you simply need to owe a minimum amount of £10,000.00 to at least two separate creditors.  These debts must be unsecured and certain debts are exempt; but your insolvency practitioner will give you more advice about this, depending on your individual circumstances.


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Uday Tank has been working with writing challenged clients for over four years. His educational background in family science and journalism has given him a broad base from which to approach many topics. He especially enjoys writing content after researching and analyzing different resources whether they are books, articles or online stuff.

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