Individual Voluntary Arrangement

The term “Individual Voluntary Arrangement” is a formal as well as a legal agreement between a borrower and a lender for complete repayment of the debt over a fixed period of time. In fact, an IVA makes the creditors secured against the debtors and it also helps the lenders to get their money as a whole from the borrowers within an agreed course of time. You can also consider it as the best remedy or measure for bankruptcy. Many borrowers apply for an IVA without knowing the important factors and reading its pros and cons. It is true that IVA can be risky but also profitable for the debtors. However, the legal effectiveness and application of the individual voluntary arrangement should be done in a set period and it will be discharged once the period is over. Secondly, the creditors will get their repayments by the legal authorities through personal saving, pensions and other sources of the debtors.

individual voluntary arrangement and bankruptcyDebts with an IVA:

Debts with IVA become fully secured and guaranteed for repayment. In general, the legal agreement between a borrower and a lender helps the creditor to receive his whole loan with interest from the borrower and there will be no possibility of insolvency. There are also specific types of loans and debts which the borrowers can use the IVA options. However, several loans do not qualify for the individual voluntary arrangement facility. Many tax lawyers and finance experts consider an IVA nothing else except a financial trap for the debtors who often become insolvent to repay their loans. The professionals may be badly affected by the IVA. For this reason, it is compulsory for the debtors to go through all the IVA pros and cons before applying for it.

Debts not Payable by an IVA:

There are different types of debt for which debtors can use the individual voluntary arrangement option to protect the loans. However, you must consider the effectiveness and direct impacts of it to your career, financial position and others before applying for it. In general, an individual voluntary arrangement is available for the following types of the debts.

  • Hire purchase debts
  • Personal loans
  • Catalogue debts
  • Overdrafts

Pros of IVA:

When you read about individual voluntary arrangement and its pros and cons, you will know many features and properties of this agreement. In general, this is a formal way to bind the creditors and debtors legally and also for the repayment of loans completely. Major pros of IVA are:

  • Affordable monthly payment
  • Very flexible repayment period of up to 5-6 years
  • Payable by full settlement or monthly
  • Once the final payment is made, the remaining amount will be written off
  • Creditors can never follow the debtors
  • Remortgage facility to save the homes

Avoid Insolvency and BankruptcyCons of IVA:

On the other hand, if you go through IVA pros and cons in detail, you will come across many problems or cons of an IVA. The following cons are very common:

  • Critical and full trap
  • Need to apply for remortgage
  • Payments will be done by freezing your savings, bank balance and pension funds
  • Higher interest rate in case of refinancing
  • Negative credit rating
  • IVA will be recorded in a public register
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