What is an IVA?

An IVA or an Individual Voluntary Arrangement, is set up by a licensed professional known as an Insolvency Practitioner; an IVA is a formal agreement made between an individual and his creditors, allowing the individual to make reduced payments toward the total amount of debt so a percentage of the total is paid off; after five years or so, the individuals debt will be classified as settled.

• An IVA is a legally binding agreement that exists between an individual and his creditors.
• It is set up to help those people who encounter financial difficulties in settling their debt, avoiding bankruptcy.
• The monthly payments that are specified in an IVA are based on the individuals disposable income.
• All outstanding debt is legally disregarded once the final payment is made.
• An IVA can cancel up to 75% of a persons outstanding debt, depending on his present financial circumstances.
• An IVA provides debtors a real solution to financial problems, ensuring that the debtor makes a single payment every month based on their income; once all agreed payments are made, the creditors are then prohibited by law from adding other charges or further interest to the debtor’s account.

Is an IVA Better than other Debt Solutions?

An IVA is generally far better than other debt solutions being made available today.

Aside from a debt solution not being legally binding, other problems may also be encountered if a debtor chooses to pay off his debts using these agreements:

• The debtor will still have to pay the entire amount he owes despite having reduced monthly payments.
• The creditors also have the freedom of adding more interest and other charges to the debtors account.
• Creditors may also change their view on the situation or break the agreement, which may make paying off the debt even harder. Bankruptcy is another option, in the most extreme of cases.

It is a good thing then that IVAs are made available to individuals who need them most. An IVA is fixed, and no creditor can make any random changes to the agreement once created. Using an IVA is a far better solution compared to other debt solutions.

These IVA characteristics make the IVA arguably the safest way to pay off debt.

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