IVAs Can Help Over-Indebted People To Avoid Bankruptcy

By Ivan Dooher

If you've found yourself in the position of being unable to meet your monthly bills, you're certainly not alone. Insolvency and bankruptcy are more common now than perhaps ever before in our troubled economic climate. However, things may not actually be as dire as they seem, and you may have choices that can help you avoid bankruptcy.

Individual Voluntary Agreements were introduced specifically to allow people to avoid going down the route of bankruptcy. When you become bankrupt your creditors are in most cases likely to retrieve less of the funds that you owe than if you use an IVA, and creditors often tend to be amenable to the idea for this reason.

Insolvency Practitioners carry out the legal aspects of implementing an IVA, and can also advise you on what the options are in your own individual circumstances, taking into account assets that you may have as well as your incomes and outgoings in general. Insolvency Practitioners specialise in situations where there is a real risk of bankruptcy, and are therefore well placed to inform and advise you of how best to move forward.

An IVA is a legal contract that you sign up to through which you commit to paying a certain amount to your creditors over a specified time period. The amounts are worked out according to what you can actually afford to pay, rather than on what you've agreed to pay in the past, and are therefore tailored to your own circumstances. Although your creditors will almost certainly receive less than the debt you owe them, they will be likely receive even less if you go bankrupt, and so they tend to be open to the agreements. Working out what you can actually afford to pay can be a task in itself, and it's something that a good Insolvency Practitioner can help you to arrive at. Naturally, it's best that you only commit to what is realistically affordable for the IVA to be effective in helping your financial situation. It may be the case that some of your debt is 'written off' although stories of this are often thought to be exaggerated.

In order to use an IVA, your Insolvency Practitioner will present your proposal to the creditors through the court system. As an IVA is normally used when you have multiple creditors to whom you owe debt, they will usually then meet and have a vote to decide whether or not to accept the agreement.

IVAs don't just help you to avoid bankruptcy, they afford you protection from further legal action regarding the debts that are part of the agreement. They also make the debts more manageable as the interest tends to be frozen while the term outlined in the IVA plays out. For this reason, IVAs can truly help you to get on top of your financial difficulties and start building a more stable future. - 32519

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