In the United Kingdom, an Individual Voluntary agreement is a formal option for individuals wanting to avoid bankruptcy.
In layman's term, an Individual voluntary agreement is a tool provided by the government in order to help you come out of a financial hardship.
In this case, if you are struggling with your debt repayment, you can opt for Individual voluntary agreement or IVA to get your creditors to accept a plan you can afford.
Under this government scheme you need to show that you cannot afford your debts.
This is generally done by showing that your monthly living cost and your monthly debt burden is actually greater than your monthly income.
With the help of IVA you can actually formulate a well structured plan as how do you want to repay to your creditors, keeping in mind your debt amount and your income level.
The IVA was established by and is governed by Part VIII of the Insolvency Act 1986 of UK and constitutes a formal repayment proposal presented to a debtor's creditors via an Insolvency Practitioner.
In this process a debtor who does not have money to pay off to his creditors and does not want to go bankrupt, can opt for an Individual voluntary agreement.
In such scenario both debtor and creditor come to an agreeable point which is approved by both the parties, and then the debt is paid off over the agreed time period.
Usually service of s debt management service is sought in order to formulate such plans and get both the parties to an agreeable point.
Unlike the popular andinformal debt management products that are actively marketed on radio and television, an Individual Voluntary agreement is legally binding and precludes all creditors notified and therefore included in the Individual Voluntary agreement from taking any enforcement action against the Debtor post-agreement assuming the Debtor complies with the his obligations in the IVA.
Generally the IVA is made available to all the individuals, sole proprietors, and partners who are experiencing pressure from creditors for speedy payment of debts, and used by primarily those who own property and want to avoid the future possibility of losing their property in the event they were made bankrupt.
Individual Voluntary agreement comes with its own share of benefits for both the debtors and the creditors.
On one hand it allows debtors to continue trade and carry out their business and make profits which would otherwise stop if the venture is declared bankrupt, it also offers the creditor higher return that could otherwise be anticipated when the debtor to be declared bankrupt.
An Individual Voluntary agreement works towards guarding the interest of both parties, the debtor as well as the creditor.