Everything you wanted to know about Individual Voluntary Arrangement

300px-Bankrupt_SaleThe credit industry has grown at a rapid pace keeping in line with the wants and wishes of the public who have become more confident than ever in borrowing money from creditors to spend on things they want even if the same are beyond their financial capacity. Because of the demand, several different kinds of loans have been developed varying according to the period of repayment, amount required to be borrowed as well as other terms and conditions.

Loans can be either secured i.e. against which the debtor gives as asset as security which can be taken possession of by the creditor if he fails to repay the debt, or unsecured loans against which no such security has been given. Log book loans are a classic example of secured loans as these loans are only given against security of a car. Logbook loan calculator is one such forum through which you can apply for loans against your car and be assured of quick disbursal and flexible repayment schedule.

However, it is the long term unsecured debts that pose the biggest problem during the repayment time. And it is for management of these debts that you would need debt management solutions like an Individual Voluntary Arrangement or IVA. An IVA is one of the most popular debt management instruments and is available exclusively to the residents of England, Northern Ireland and Wales.

What is an IVA and how it works

An IVA is an arrangement between the debtor and his creditors wherein the debtor pays a fixed monthly instalment towards payment of his debts and the creditors free the interest and write off a portion of the debt. To execute an IVA, an Insolvency Practitioner will have to be engaged by the debtor who would make an assessment of his financial situation and deal with the creditors on his behalf. Once the creditors have agreed to write off a portion of the debt, which can be up to 25% of the total amount or more, the IVA can be formally executed. The debtor is under an obligation to pay the fixed monthly amount. If he defaults on payment, the IVA automatically lapses and the creditors can then take legal action against him.

Pros and Cons of an IVA

IVA is generally considered to be a beneficial option for both the debtor and creditors. The pros of an IVA for a debtor are that he no longer has to deal with harassing creditors and instead has to pay only that amount which he can afford to pay without giving up on the necessary living expenses. Moreover, the interest rates are also frozen as soon as an IVA is signed so that the amount of total debt does not increase.

On the other hand, IVA is also considered to be beneficial for the creditors as it enables them to recover a major portion of their loan. Although an IVA generally requires the creditors to write off some amount of the debt, at least the creditors are ensured that the remaining amount will be paid back to them after a fixed period of time. As compared to declaring the debtor bankrupt, the creditors too prefer an IVA.

Apart from the advantages of IVA, it also comes with its own set of limitations, the biggest being that it reflects in a very negative way over the credit rating of the debtor. Moreover, his entire lifestyle is effected as his income and expenses are closely monitored by the Insolvency Practitioner as well as creditors. However, again as compared to bankruptcy, IVA is definitely a much better solution.

Is IVA right for you?

Each person has his own set of financial difficulties which are affected by different factors in his life. As such, there is no custom made debt management solution for anyone. IVA is well suited for those whose debt amount has crossed 5,000 Pounds and who have more than one creditor. However, before deciding to go for an IVA, it is best to consult a debt management company to get an expert insight into your financial status and whether IVA really is the right option for you or not. Your money site is one such forum where you can expert advice from a team of professionals who have vast experience in handling different kinds of cases and who can lead you to the right path.