Avoiding Bankruptcy is a huge worry for many individuals suffering with debt, generally people who are struggling to repay debts are the main consideration for bankruptcy, this is due to the fact that people who have less means to pay off their personal debts to bring their finances in order are more likely to go bankrupt, however this can be avoided (with an IVA – Individual voluntary arrangement).

How The IVA Can Help Someone Avoid Bankruptcy

The IVA can help someone avoid bankruptcy by providing legal protection against creditor liquidation initiatives, and also providing a Government supported vehicle by which people can pay reduced amounts towards their debts each month, (bill consolidation) which helps them to clear their debts much faster than they would be able to if they hadn’t taken up the IVA.

There are a host of benefits within an IVA (Individual Voluntary Arrangement), there is the consolidation of monthly bills mentioned above there is the benefits for helping people address their highest priority debts (by handling the unsecured personal debts) such as any mortgage repayments, any debts owed to courts, any debts which are owed on income tax enabling the debtor to address their unsecured debts.

The IVA also helps people struggling with bailiffs to manage their situation, by placing an appointed representative to manage their debts and liaise with their creditors so they don’t have to, freeing them up to continue with normal day to day life and focus on earning money so they can comfortably meet their monthly debt contributions.

Rules Of The IVA

  • Monthly repayments must be kept to, if the schedule is broken then this can cause hassle for the debtor in the IVA, which can make getting rid of the debt issue more difficult for the person trying to alleviate the problem
  • In an IVA it is very important not to take out any further credit over £500, as this will be advised during the course of the IVA as a measure to protect the person in debt from further problems and a growing concern.
  • Any IVA Service will require the person in debt agrees to the terms of the IVA service and IVA agreement, any deviation from this agreement can result in the termination of the IVA, which could mean ultimately the debtor may become bankrupt.
  • It is also important that the person in the IVA doesn’t contact their creditors directly because this violates the terms of the IVA to begin with, and it could also complicate the terms of debt repayment, plus the creditor may start asking for extra contributions.
  • The exact amount must be paid into the IVA per monthly unless pre agreed with the appointed representative.

In Summary

The IVA can be a very useful utility to help people become debt free over a period of 5 years, a big part of this is the fact that after the 5 year term, the remaining debt is cancelled and cleared as part of the agreement, think carefully before entering into the IVA to ensure it’s suitable.