SAVE Yourself From Bankruptcy: Apply for Debt IVA Today!
Debt IVA or Individual Voluntary Arrangements are alternatives to Bankruptcy. Considering the current US Debt Crisis, it is a considerable option. To process IVA, you need an Insolvency Practitioner. The individual gets IVA advice and related help from the practitioner. However, it is a legal process that protects individuals struggling with debts in the US.
It is helpful for the creditors, too. They get leverage in the form of quicker and better returns than the bankruptcy of the borrowers. Today, the public debt of the US is $36 trillion. Hence, the situation is no short of a serious debt.
There are several reasons probing people are in serious debt. But Debt IVA can be the means to their rescue. The process lets you propose a composition that satisfies the debtors. Borrowers may also suggest schemes of arrangements.
It is a flexible process. There may be several outcomes of the process. However, the final process depends on whether creditors agree to the proposal.
What is Debt IVA in the US?
Firstly, IVA is strictly legally binding. Under the same, you agree to pay a certain amount to the creditors in a given period. However, any unpaid components included under IVA would be written off.
You can set up an IVA in several ways. Firstly, there could be a monthly repayment plan over a fixed tenure. It might be a short-term thing, too, if you have a lump sum to put forward. I’ve seen many IVAs which combine installments with lump sums.
Our experts’ take
FinanceTeam considers IVA an effective tool for managing debts. However, there are benefits as there are downsides to the process. We will discuss that later.
Tenure of Debt IVA
Typically, your Debt IVA might last for one to five years. In the meantime, the interest on your existing debts would be frozen. Most importantly, repayments would be made to creditors from borrowers’ earnings or realization of their assets.
The agreement would be made when 75% of your creditors agree. Once agreed, the proposal terms would legally bind you and all your creditors.
The National Panel for Debt IVA
The National Debt IVA has a special panel. You may get an insolvency lawyer from that list. Let’s dig deeper and find out if it’s the right solution.
Often, readers ask me if they have to follow an IP recommended by National Debtline. On that note, you don’t have to use any IPs with which the National Debtline works.
Can I apply for Debt IVA?
Anybody can apply for Debt IVA. However, there are some criteria you need to meet. Firstly, you can use it if you are a private individual. Your spouse or partner can also apply instead of you.
You can also apply if you are a sole trader. You may also continue your business once you’ve applied for IVA. Thirdly, directors in limited companies may also apply for Debt IVA. Lastly, people in certain professions, like solicitors or accountants, might also apply.
These people can’t advance in their profession after they’re declared bankrupt. Hence, it is better if they apply for IVA.
Pros and Cons of Debt IVA
Debt IVA is an agreement that can be an alternative to your bankruptcy. It is one of the finest debt reduction strategies as well. Licensed insolvency practitioners make a formal arrangement between borrowers and creditors. However, the central role of the IP is to help you repay a prominent portion of the debt without profound implications like bankruptcy.
Before you apply, learn about the pros and cons of Debt IVA.
IVA Advantages
If you are looking for an option to pay off debts and bypass bankruptcy, IVA is your option. It helps you with:
1. Affordable monthly payments
2. Protecting your assets in parts
3. Unaffordable debt is waived off after Debt IVA is granted
4. Freezes all interests on debts
Your IP will analyze your staple expenses and your income. Hence he will set a tailored amount you will pay your creditors each month. So, your debt IVA will be highly flexible, keeping in mind how much you can spend.
This arrangement makes it easier to pay off debts at an easy and affordable rate. Moreover, IVA protects your assets.
Your assets will be realized to pay off a part of your debt. However, the IP will consider your assets when applying for IVA. Hence, you won’t have to sell them to pay off your debts.
Most importantly, IVA waives off your remaining debt. Generally, the IVA remains for 5 years at the most. After that, the remaining debt is scrapped from your debt account. Hence you have to pay much less than what you owe.
However, IVA’s most prominent benefit is that it freezes all interests on debts. It also alleviates all creditor pressure. I already mentioned that an IVA is binding if 75% of the creditors agree.
If an odd creditor disagrees, that won’t matter much. It will still be binding on all the creditors in your case.
IVA Disadvantages
Do you know about all the implications of the Debt IVA arrangement? It could also hurt you and your finances going forward. Here are some of the effects you must be aware of:
1. Debt IVA approval requires creditor approval
2. IVA becomes public
3. It also impacts your credit score and makes the process of Rebuilding Credit difficult
4. You cannot violate IVA. It is a legally binding document.
5. It does not apply to all forms of debts
A Debt IVA will only go through if 75% of the creditors agree. If creditors assume they are not getting better returns than bankruptcy, they won’t agree to the deal. Therefore, you will have to explore other application options.
A public listing of IVA will affect your image if you work in the public sector. Most importantly, your name will appear on the IVA register for at least 3 months. So check with your employer before applying for IVA.
However, I feel that the impact on credit score is the most detrimental effect of debt IVA. Meanwhile, you will have a hard time getting any credit line in the future. Also, you will hve to seek the IP’s permission if you want to borrow more than $500 in the Iva period.
The IVA effect will stay on your credit report for upto 6 years after it concludes. Hence, getting a substantial loan during that period will be difficult. Lastly, don’t forget that IVA is a legal arrangement. Indeed, it gives you a level of flexibility. However, you have to keep making the repayment as agreed. At the same time, keep saving and keep your financial dashboard healthy.
You cannot violate the repayment clauses in any way.
All debts Don’t Qualify for Debt IVA.
Debt IVAs are the best for unsecured debts. However, it is not a universal solution for all sorts of debts. Remember, petty debts are not eligible for Debt IVA. Meanwhile, some of the debts might not be eligible for Debt IVA.
For example, secured debts don’t count when considering Debt IVA. Same with child maintenance debts or student loans and similar debts.
If my IVA proposal is rejected?
Your IVA proposal may not go through. After all, it depends on the creditors to allow an IVA proposal. But what to do in that state? You can approach all the creditors individually. You may lose the money invested s fees and costs for the IVA application. So, think cautiously about what you would like to do next.
Don’t apply for an IVA again until your current circumstances have improved. When you can put forward a better proposal, apply again. Contact attorneys or practicing IPs if needed.
The IVA and your Home
You must provide a precise home valuation while filing your Debt IVA. You can go for a free valuation. Or hire local estate agents who will evaluate your home for free. Firstly, the IP will agree with you on a validation. Then, he will decide your share of equity from the whole.
Usually, it is based on 85% of the property’s value after ignoring the value of all the existing mortgages and any secured loan. When your equity share is decided, the IP will declare how the equity will be treated in the IVA.
Summary
The Debt IVAs have their benefits and challenges. You must consider all equally before you apply. Indeed, it is the best bankruptcy alternative. At least the long-lasting effect on your financial credibility can be avoided.
Some firms charge no upfront fees to process your IVA. Once approved, your creditor pressure would be gone. Your interest rates will be slashed, too. As the IVA tenure ends, the unpaid debts will be written off forever.
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