Individual Voluntary Arrangement is a form of debt management available for individuals who are not at a position to service their debts normally. This means that it is not a method at your disposal every time you get into debt. An IVA is available to an individual or even a corporate entity and one can only qualify for one IVA. Some argue that it is alternative to bankruptcy but it is good to note that bankruptcy and IVA may not necessarily be mutually exclusive.
There are two types of fees that are magnanimous with this kind of an arrangement. The first is the setup fee. This is charged just once when the arrangement is being setup. The second type of fee is the charge by the insolvency practitioner for the insolvency services given. This fee is dependent on different practitioners and is payable regularly. The practitioner deducts the fee from the sum of money submitted by the debtor before he pays the creditors.
Selection of Practitioner
One should be certified in order to work as an IP. Certification means you have undergone the required training and have met the minimum standards for registration. It is better to work with a certified IP than with one who is not. Secondly, the amount of fees charged is very important. The debtor is already in a financial turmoil and charging very high fees will only serve to compound the situation. In addition to this, the amount of experience on has is crucial as it determines the negotiation skills as well as the quality of financial advice given.
Roles of the practitioner
Although he or she may advise the debtor when he is drafting the proposal, the duty of drafting the proposal falls squarely on the shoulders of the debtor and his financial advisers. These financial advisers need not be IPs but an IP may act as a financial adviser too. One of the major roles of these experts is to ensure that they act as the link between you and the creditors. He has the duty to receive payments and pay to the creditors their dues on a timely manner. He also has the duty to ensure that all the information that the debtor passes on to the creditors is given as accurately as possible and on time.
As a debtor, your finances will be under scrutiny for the entire period you are under the arrangement. Therefore, you are required to share all information regarding major financial expenditure with the Insolvency practitioner before you spend the money. This means that you gave to consult him or her on major financial decisions. He should apply due diligence and advice you with respect to the prevailing circumstances.
You will not lose your property or your house as long as you remain true to the agreement and keep up with your regular payments. In addition, the debt does not attract interest or any other charge during the course of the agreement. After the period agreed upon has lapsed, the amount over and above what has been paid is written off. The period agreed upon grants the debtor substantial amount of time to get their finances in order and start afresh upon expiry of the time given.
First, you will have to consult before you make any financial commitments which limit your freedom to do as you please for the entire period. Some adults may find this a nuisance and may try to hide their expenditure. However, it is for your own good. The arrangement only protects you from action by creditors of debts that are included in the arrangement. Any new debt arising after the commencing date of the IVA is not part of the arrangement. The creditors in question may sue you for their money. It is also good to note that the IVA has an effect on your credit rating before you apply for IVA.
The arrangement may fail if the individual is not committed to the deal. This will result in a worse financial turmoil than there was at the beginning. When this happens, you may face legal action to pay off your debts. This may result to stigma or other unwanted vices that may drive a debtor to desperation.