Individual Voluntary Arrangement- A Short Briefing
The Individual Voluntary Arrangement (IVA) was introduced with the object of providing a preventive measure against bankruptcy. Thus, it is an alternative scenario of bankruptcy since IVA is intended to avoid the situation of bankruptcy through a mutual negotiation of creditors’ claims between the individual and his creditors. An IVA program can meet the claims relating to personal loans, credit card balances and various other types of “buy now, pay later” unsecured loans.
An IVA is a legally binding contract between a debtor and his or her creditors. It enables an individual to give a formal proposal to his or her creditors to settle a debt after negotiation within a stipulated period of time. However, the agreement between the indivisual and his creditors lasts for five years..
An insolvency practitioner (IP) will help put the proposal to creditors and negotiate an agreement. The debtor will have to disclose full details of his or her financial circumstances.
If more than 75 per cent of the creditors accept the terms of the proposal, it is binding on all the creditors. Creditors can put forward changes to the proposal but the debtor can decide whether or not to accept them.