Individual Voluntary Arrangement

Going the Individual Voluntary Arrangement (IVA) Route

A lot of times when debts become overwhelming, most people think of bankruptcy as a last resort to resolve the crippling pressure. But there are other less drastic options that can be considered. For example, there is a method called the Individual Voluntary Agreement or IVA. This is an agreement that you make personally with your creditors to pay off a certain pre-arranged amount of the loan over a certain amount of time (usually five years). This is made between you and the creditor, with the help of an insolvency practitioner. If you meet the requirements, the remainder of the debt, if there is any, is written off. You are the one who usually initiates it, though even the bankruptcy courts can do so, but once you do, the courts are required to decide if it is a more viable option for you and your situation than bankruptcy.

There are some great advantages to choosing IVA rather than bankruptcy. For example with bankruptcy you may have to put your assets up for sale and lose them or put them at risk to be repossessed by the creditors you may owe. While an IVA is not completely risk free, it is definitely a lot less risky than bankruptcy. This is because with an IVA you initiate the agreement and can make arrangements that leave your house and such off limits to the creditors. Usually in an IVA you are asked to put up any of your assets that can be liquefied, such as bank accounts instead of your home or things like that. Though a part of your equity may still be at risk at the end of the IVA. Still this option is definitely a lot less risky than bankruptcy.

Something that should be taken into consideration when going the IVA route is how your future assets may be affected. For example if you are expecting an inheritance during the period of the IVA, you may want to consider how the creditors may see this and how they could try to come after it. Also if you are to receive an increase in any assets, you should do what you can to protect these. Though you should not go so far to protect them that you are deliberately trying to evade the creditors. Because you can protect any gains you may receive in assets, you may not consider this a risk at all. But you must be careful about protecting this and make sure it is part of the original agreement, to avoid the complication of having the creditor trying to obtain these.

One thing that is basically the same whether you choose an IVA or bankruptcy is how it affects your credit. Your credit will be adversely affected either way. Though it may not be affected as much as if you have a bankruptcy on your record. During the life of the IVA, you will not be able to gain any new credit whatsoever. Afterwards, you may be able to gain a mortgage, but not for six to twelve months afterwards. Also you will be subject to higher interest rates and more money down. This however could be better than nothing, which is what you could end up with if you claim bankruptcy instead. There is however some costs involved in IVA, depending on whom you go with. Of course, the costs could outweigh the fact that there is usually less stress and stigma related to an IVA as compared with bankruptcy. Also an IVA is on your report for six years, instead of the usual seven years associated with a bankruptcy. You also have more control in the agreement, than if you went the bankruptcy route. You have more control over the assets available to the creditor and therefore you can feel more secure in resolving your debt issues.

In the end you must carefully and thoroughly weigh the advantages and the disadvantages of bankruptcy versus an IVA. If you have poor credit and are looking for an option that offers less risk, more control in the agreement process, a better chance of being able to obtain future credit, and less stigma and stress, than an IVA would seem to be the best option for you and your needs.

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