Knowing Individual Voluntary Arrangement

Bankruptcy is becoming a major problem in most parts of the world. The ability of the debtor to pay his obligations and dues to his or her creditor is made worse by multiple debts that they cannot afford to pay. In the United Kingdom, the parliament has enacted the Insolvency Act of 1986 and introduce the Individual Voluntary Arrangement or IVA. It helps debtors pay their obligation, thus, preventing bankruptcy.

County Court Judgments (or CCJs) are issued to the debtor, ordering him to pay his obligations and dues to his creditor. Because of this, debtors are often forced to sell all their assets just to pay off their creditors, thus, bankruptcy will be the result. In order to prevent this, IVA was proposed to both debtors and creditors.

IVA is an agreement between the debtor and the creditor. It allows the former to pay his obligations and dues to his creditor in a specified period of time (usually three years) provided that both parties will follow the provisions stated in the IVA.

For example, Mr. Smith has a total obligation of $120,000 to all of his creditors. If the IVA is accepted by both parties (provided that 75% of all the creditors had agreed on the IVA), then Mr. Smith will pay a sum of $10,000 monthly within a period of one year provided that his creditors will not sue him or petition him in court to declare bankruptcy.

IVA proposals must be accepted by 75% of all of the creditors before it will be implemented. They are also based on the debtor's capacity to pay (income, etc.). The success of the IVA depends on the compliance of both parties to the agreement. Any breech of the provisions of the contract will be enough ground for termination of the agreement.

IVA is a great help especially to debtors. This helps them pay their obligations to their creditors, thus, preventing bankruptcy.