An IVA (Individual Voluntary Arrangement) is a legally binding agreement between an individual, couple or partners (the debtor(s))and the institutions, companies and other parties to who they are indebted who’s debts are not secured against property (unsecured creditors) which must be supervised by a Licensed Insolvency Practitioner and is also subject to court supervision.
The agreement is generally for the debtor to pay an affordable amount each month into a central fund to allow unsecured creditors to receive proportional payments against their debts. The agreement will generally last for a period of 5 years, however they should be tailored to an individual’s circumstances. The arrangement will normally include an element of debt forgiveness and is an alternative to formal bankruptcy proceedings.
The IVA must be approved by a majority of 75% of unsecured creditors who chose to vote on the terms of the arrangement. If the IVA is approved then all unsecured creditors will be bound whether they agreed to the proposal or not, unlike unregulated debt management products, and prevents such creditors from taking and collection action during the period that the IVA is in existence or after its conclusion providing the debtor(s) has complied with his or her obligations under it.
If the IVA is successfully completed then any balance due to the unsecured creditors will be written off leaving the debtor(s) with a clean slate.
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