IVA Advantages
An Individual Voluntary Arrangement (IVA) can have a number of major advantages for consumer debtors and small businesses with overwhelming debt problems as well as creditors.
Advantages to Debtor
- An IVA is a private agreement between you and your creditors. Even though a copy of your IVA will be lodged with the local County Court, The Inland Revenue and The Insolvency Service Register, no formal local newspaper notification will be made as with a personal bankruptcy.
- An IVA is usually far more flexible than bankruptcy. The debtor works with the Supervising Insolvency Practitioner to repay what can be reasonably afforded.
- It is easier to maintain some banking arrangements in an IVA than it would be as an undischarged bankrupt.
- The monthly repayments in an IVA can be reduced by more than two thirds compared to the original credit agreements.
- All interest and charges are stopped so the debt does not continue to increase as the IVA progresses.
- Any legal action including bankruptcy proceedings is stopped once an IVA is approved.
- An IVA allows the debtor to remain in any directorships and continue to trade as a sole trader.
- A self employed debtor in an IVA can still access trade credit – with the Insolvency Practitioners permission - if the use of such credit will stimulate a greater IVA return to the creditors.
Advantages to Creditor
- The net return to creditors in an IVA is usually higher than a bankruptcy because the maximum repayment period in bankruptcy is 36 months as opposed to 60 months in an IVA.
- The costs of bankruptcy are often lower than Insolvency fees in an IVA meaning that the return to unsecured creditors is also improved.
- The actual collection of the debt is undertaken by the supervising Insolvency Practitioner which reduces creditor costs.
- Creditors can claim tax relief on the bad debt against profits.