If you are from Eastern Europe, mainly the Czech Republic, then Iva is a woman’s name, or maybe a character in a book. But, in the United Kingdom, an IVA is what is known as an Individual Voluntary Arrangement; and it is a way for a person to avoid bankruptcy. First created in 1986 by the Insolvency Act, an IVA is a way for someone in debt to propose a repayment plan to his or her creditors. It is a formal agreement, usually drawn up and presented to the creditors by an Insolvency Practitioner, and it only applies to the debt a person owes to unsecured creditors.
The IVA plan has several key advantages to it, not the least of which is its flexibility. So long as the creditors are satisfied, the person can build it around their unique conditions: their income, their resources, and any help from a third party (friends, family etc.). Then there is the issue of bankruptcy. If an IVA works out – if it is acceptable to all concerned parties – the person can sometimes avoid bankruptcy. Think of all of the positive aspects of that! A bankruptcy will affect you credit, your ability to organize a business, and there is a certain stigma associated with it. Setting up an IVA is cheaper than the cost of discharging a bankruptcy, and you can be assured of keeping your home. That right there is a major reason for making use of an IVA. Finally, all of your creditors are bound to adhere to the IVA, even if they do not like it (that part will be explained in the next section), which means you will not be hounded by individual creditors trying to get their money from you faster than you have agreed.
The Insolvency Practitioner plays a key series of roles in the IVA process. First they are an advisor. They will look at all of your debt, draw up a list of possible solutions: re-financing, debt consolidation, bankruptcy etc. and then discuss the pros and cons of each. If you elect to go with an IVA, they will then draw up the formal agreement. They will look at your income, your debt, and figure out how much you can pay into the IVA, and when. You may do it monthly (the most common), quarterly, weekly etc. The proposal will also include some background information to explain how your financial difficulties arose. They will also list all of your assets, and break them down as to which ones will be included in the agreement, and those to be excluded.
Next, the Practitioner will act as the Chairman of the creditors’ meeting. This is where the IVA is formally presented to them, and they vote on it. Now, here is the tricky bit: the creditors do not vote as individuals, they vote according to how much you owe each of them. Sort of like shares of stock in a company. So, if you owe Mr. Smith a thousand pounds, and nine other people each a hundred, even if the nine all vote “no” on the IVA, if he votes “yes” – it is accepted!
After that, the Insolvency Practitioner then becomes the Supervisor of the plan. They will make annual reports to everyone – including the court, they will monitor everything to insure all payments are made on time, and the monies distributed as per the IVA, and report to the court of the debtor misses three or more payments. This is the critical bit; because failure to make regular payments could mean a judgment of bankruptcy against you, and then the creditors take the lot! So, if used properly, an IVA can be an excellent means of getting out of debt.
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