Individual Voluntary Arrangement Rescue or Rip-Off
What is an IVA ( Individual Voluntary Arrangement )
An Individual Voluntary Arrangement, commonly referred to as an IVA, is a contract that is binding to both the debtor and creditors. This agreement is usually made by individuals, partnerships, or limited companies who are struggling to pay off their unsecured debts. Under an IVA, the debtor agrees to sell off some assets or make payments from future earnings to pay back the creditors. Once the IVA is approved by the creditors, it becomes mandatory for all unsecured creditors to adhere to the terms of the agreement.
The normal time-span for an IVA is five years.
IVA Huge Fees
One of the major issues with Individual Voluntary Arrangements (IVAs) is the excessive fees levied by insolvency practitioners. These fees can be substantial, sometimes reaching into the thousands of pounds, and are typically required up front. Even if the IVA proves to be successful, ongoing administrative fees can still be substantial and can erode the savings achieved through the agreement.
IVA Bankruptcy Clause
Individual Voluntary Arrangements (IVAs) are often structured with strict clauses that require the debtor to strictly abide by the terms of the agreement. If a payment is missed, the consequences can be severe and may result in the person being declared bankrupt.
IVA Property Clause
Very often within an IVA there is a clause relating to the property. If an IVA runs for a term of five years, the property under an IVA is valued in year four. Should there be any equity in the property, the insolvency practitioner can request that the equity is realised, in order to pay the creditors.
If re-mortgaging is not available to release the equity, this may trigger an enforced sale!
At the beginning and IVA can seem like a good idea, but this happened in year three of the IVA; “XYZ are my trustee, I have paid contributions to my IVA for 3 years,, they now want the equity in my ex-council flat. I will be left homeless and with nothing, can I sell the flat myself, pay off the mortgage and make them an offer? Would I get into serious trouble, I don’t know who holds the deeds, can you advise.”
IVA Failure Rate
Individual Voluntary Arrangements (IVAs) have a disturbingly high rate of failure, but it’s challenging to find accurate statistics through the Insolvency Service. Based on my personal experience and conversations with individuals every year, I strongly believe that the number of failed IVAs is substantial, as I have heard numerous accounts of people struggling to fulfil their obligations under the agreement.
Please be advised that this is my personal findings. Anyone looking to go into an IVA should find out as much information as possible, before signing the dotted line.
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