What is an IVA?
In Credit Repair of CreditGuru (April 22, 2009 2:03 pm)
There are typically two options for borrowers that are unable to pay back the loans they have to lenders. One, he may apply for bankruptcy and bear its consequences. If he does that he stands to lose his house/property, business, creditworthiness and reputation. The second and a better option is to contact the creditors, explain his financial problems and reach an amicable settlement with them about the repayment of his loan. Your creditors will understand where you are coming from in this case. While the borrower wants to avoid filing for bankruptcy and facing its consequences, the lenders also want to avoid this situation because if the borrower is declared bankrupt they will lose their money. A partial recovery is much better than almost no recovery and this is best achieved by arriving at an Individual Voluntary Arrangement or the IVA.
As the name states, an IVA is an arrangement that is voluntary between you and your lender. However the Arrangement is very much legally binding by the court of law and because of this it is mandatory for an Insolvency Practitioner (IP) to be present during the meetings. An Insolvency Practitioner extracts concessions in form of reduced payments from both parties and helps them arrive at an arrangement for the repayment of loan. A repayment of an IVA typically takes 5 years.
Keep in mind that IVAs is different from Debt Management Plans or Debt Relief Orders. As mentioned previously, an IVA is legally binding by the court and both parties have agreed to this.
Individual Voluntary Loans can allow you to get as much as 75% of your debts written off so it is very helpful for many people. Interest and debt charges are frozen and the creditors cannot demand any additional payments. Once the repayment proposal is accepted by both the parties, it is submitted to the court for an interim order. From that point on you will have no legal obligation to your lenders and you can start building up your credit again.
The IP reviews the financial position of the borrower from time to time during the term of the arrangement to see if there is any change in his circumstance.
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