What is an Individual Voluntary Arrangement?

January 20, 2010 By

If you live in the United States, chances are you have never heard of the term Individual Voluntary Arrangement, which is often referred to as an “IVA.” This term represents Britain’s answer to Chapter 13 bankruptcy. Much like a chapter 13 bankruptcy, you don’t relinquish your debts, but you do come up with a plan to pay them off over time.

IVAs were established by the British government as Part 8 of the Insolvency Act of 1986 and provides a formal repayment proposal presented to a debtor’s creditors via means of an insolvency practitioner. Usually, but not always, the IVA comprises the claims of only unsecured creditors, allowing the rights of secured creditors to remain largely unchanged.

An IVA is a legal agreement between the debtor and the credit and can be as flexible as the individual’s personal financial circumstances. IVAs are often based on capital, income, third party payments or a combination of any of the above.

Individuals that have enough money to pay for their secured loans and take care of basic living expenses, but not enough to pay for all of their unsecured debt might benefit from going through an Individual Voluntary Arrangement. Individuals with less serious debt might want to consider going through a debt management plan rather than an IVA.

The process of getting an IVA involves a meeting with the individual’s creditor to consider the IVA proposal. The return for creditors is often higher than what they would get in bankruptcy. A vote by the person’s creditors, almost always by proxy, will be taken and 75% of the creditors must agree to the plan.

In the United Kingdom, an increasing number of consumers in debt are turning to specialist debt advice organizations, or an IVA company, that offer assistance to work through an IVA as an alternative to bankruptcy.

Posted in Credit