Worrying about finances is now more common than ever. A lot of people can barely make ends meet, even those who work more than one job. Unfortunately, many still fall into debt, no matter how much money they make It doesn’t necessarily mean you’re poor at managing your finances, but bills can quickly pile up and you could find yourself owing a lot of money before you even know it.
This is a tough situation many find themselves in, and getting out often proves difficult. One way that could help you handle your debt is by setting up an IVA.
An Individual Voluntary Arrangement is a way for you to settle things with your creditors that doesn’t include you selling everything you own. An IVA is a legally binding document that helps you repay your debt to creditors over a certain period of time –– which is usually longer than the one you already have, and with less money as a monthly payment. Here’s how you can set it up.
This is the first step that you need to do before you set up an IVA. The insolvency practitioner will help you figure out if this is your best option or if you could do something else to manage your debt. While bankruptcy is considered problematic and a stigma that nobody likes to bear, it is sometimes the best option for your finances. In other cases, an individual voluntary arrangement is the way to go, and a qualified insolvency practitioner will be the judge of that as they are the ones who look into your finances and debt and advise you on the proper course of action.
The insolvency practitioner will most likely suggest this as the first action to be taken because your creditors might be preparing to take legal action against you, which might force you to go bankrupt. An interim order stops them from doing that until you can set up the IVA and reach an agreement with them to settle your debt.
This next step in setting up the IVA involves going over your finances with the insolvency practitioner. You need to come up with a payment plan over the next 3 – 5 years, which entails monthly payments to your creditors over that duration. As explained on https://www.scottishtrustdeed.co.uk/apply-for-an-iva/, in an IVA, the debtor pays back only a portion of their debt, and you need to come up with a payment plan with the insolvency practitioner. This plan will be determined after they examine your finances and figure out how much you can pay. You might be wondering why creditors would settle for anything less than the full debt. The answer is because they would get more money through an IVA than if you had declared bankruptcy, which is why most of them settle for the IVA.
After going through your monthly income and assets with the insolvency practitioner, they will prepare a proposal for the court and the creditors. It will include your agreement to the IVA and the fact that you will be paying your creditors over the next 3 to 5 years, and how much you will be paying. It will also contain details about your income and assets, reaching to the conclusion of the amount of money that you can pay monthly until your debt is settled. It might also contain a comparison between the money your creditors would get if they agreed to the IVA compared to if you declared bankruptcy –– as an incentive to have them sign off on the agreement. Last but not least, it would contain the insolvency practitioner’s recommendation to the court on the IVA.
What usually happens next is the insolvency practitioner will invite all creditors to a meeting where they can vote on the IVA. You can attend that meeting if you want, though it is not obligatory. The creditors will vote to approve or reject the agreement, and if a number of them representing 75% or more of the total debt agrees, then it passes. This means it will apply to all creditors, even those who didn’t sign off on the agreement.
An Individual Voluntary Arrangement isn’t perfect, and it definitely has its downsides. However, it is often the best option in many cases and it is most likely much better than the alternatives. Before you consider this solution, you need to make sure that you have no other choice and that this is the best way to go. If it is, then you should definitely set up an IVA. It will save you a lot of trouble, and you will at least get to keep your house.