RSS FeedBankruptcy is a powerful word that conjures up allsorts of private emotions in the minds of the indebted and, for this reason many people will do all they can to avoid the prospects of being made bankrupt. For others, however, the need to avoid bankruptcy is based more on the fact that they face losing their income.
For people in the UK whose profession prohibits the bankruptcy route, such as employees in the Armed Services, the Police Force, bankers, accountants, lawyers and some civil servants for example, there needed to be a debt solution that acted as alternative to bankruptcy.
And it was with these people in mind that the UK government introduced an amendment to the Insolvency Act in 1986, introducing the Individual Voluntary Arrangement, or IVA as it is more often referred, to act as an alternative to bankruptcy for, among other reasons, those people whose occupations forbad bankruptcy as an option.
An IVA provides the chance for a debtor to make a new agreement with creditors, whilst removing the threat of legal action being taken in the pursuit of the debt. Both parties must voluntarily agree to be bound by the terms of the IVA, but once agreed by the necessary majority, the IVA legally binds all parties to it.
The IVA, in turn, offers creditors the chance to receive a structured repayment plan from the debtor, designed to generate a larger financial return than would otherwise be achieved through the debtor’s bankruptcy. This ensures that all parties benefit from the arrangement, but to ensure all parties are upholding their part of the agreement, a licensed insolvency practitioner is employed as a supervisor and arbitrator.
The IVA has a predetermined fixed time period, normally set to 5 years, during which the debtor makes repayments, based on predetermined affordable levels, into his IVA fund.
Once the IVA reaches the end of its fixed time period, the debtor is considered completely debt free, with any outstanding debts being written off by the creditors as part of the agreement. These leaves the debtor completely debt free and able to continue in their chosen profession.
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