Proven Advice To Save Yourself From Bankruptcy - From The Experts

There are many solutions available in the UK for people struggling with debt. One such option is an Individual Voluntary Arrangement (IVA) and recent figures suggest that IVAs are now more commonplace than bankruptcies in the UK.

What is an IVA?

KIran Mistry a leading Insolvency Practitioner states that an IVA is a legally binding contract between you and your creditors. The aim of an IVA is that an agreement is reached with creditors incorporating issues such as reduced monthly repayments, the cessation of legal action and, most importantly, the avoidance of having to apply for a bankruptcy order.

How do I obtain an IVA?

In order to obtain an Individual Voluntary Arrangement you must appoint a qualified "insolvency practitioner" (IP) to act for you. IPs are authorised under the Insolvency Act 1986 and can provide advice to individuals or companies on the different procedures available as well as an assessment of your current financial condition. Courts and the office of the Official Receiver can provide details of local insolvency practitioners.

Once you have appointed an IP an application to court is made for an "interim order". This stops your creditors from proceeding with a bankruptcy petition or taking other court action. Your IP explains your situation to the court and then it is up to your creditors whether they vote to accept your proposals. This is normally decided at a meeting of all the creditors involved.

If the proposals are accepted they become binding on all the creditors and your insolvency practitioner supervises the arrangement in place and ensures the creditors are paid in accordance with the agreed proposals.

What are the advantages of an IVA?

The main advantage of an IVA is that the monthly payment agreed to your creditors is affordable on a monthly basis. Rather than having to pay many creditors every month, an IVA ensures that the payment is manageable based on your financial situation. The IVA also ensures that your creditors cannot harass you directly any more as all payments are made via your insolvency practitioner.

IVAs also have fixed terms, typically three to five years. This gives you certainty that you know exactly when the agreement will terminate and when you will be out of debt.
IVAs also avoid the stigma of bankruptcies, details of which are published in local newspapers. An IVA does not need to be publicised and so there are no adverse social implications of entering into an IVA.

Some disadvantages

Whilst an IVA might ensure you avoid having to obtain a bankruptcy order, there are some negative aspects. Firstly, you must have debts of at least £15,000 to be able to apply for an IVA and this rules out many individuals. Secondly, your income is closely monitored during the period of the IVA as your insolvency practitioner will carefully check payslips and other income to ensure the maximum amount possible is being paid. During the term of an IVA there are also restrictions on the use of store or credit cards.

Another major disadvantage of an IVA is that it will be held on your credit file for up to six years. This will significantly affect your ability to obtain credit in the future including mortgages, loans and credit cards.

Moe Nawaz a business turnaround consultant said whilst IVAs are becoming more commonplace, they are not the most appropriate solution for everyone in financial difficulty. It is worth contacting a reputable insolvency practitioner or turnaround consultant in order to discuss the various avenues open to you before any decisions are made.

Kiran Mistry (Insolvency Practitioner)
Moe Nawaz (Turnaround Consultant)
Kiran Mistry and Moe Nawaz have a combined experience of over 30 years in the Insolvency and Turnaround business. They have helped and advised 10,000's of business owners in the UK.

Kiran Mistry (Insolvency Practitioner)
Moe Nawaz (Turnaround Consultant)
Kiran Mistry and Moe Nawaz have a combined experience of over 30 years in the Insolvency and Turnaround business. They have helped and advised 10,000's of business owners in the UK.