An IVA (Individual Voluntary Arrangement) is an insolvency solution, designed for people with an unmanageable level of unsecured debt that they can't afford to repay within a reasonable amount of time but that they can commit to making regular monthly payments towards.
An IVA is designed to get borrowers out of debt in (in most cases) 5 years. You will be required to pay most of your disposable income (total income minus essential expenditure) to your IP (Insolvency Practitioner), who will subsequently distribute funds amongst your unsecured creditors according to how much you owe each of them (this is called a pro rata payment).
A potential problem with IVAs is that no-one can guarantee their financial circumstances will stay the same. However, if you are as sure as you can be that your circumstances won't change significantly over the next five years, then entering an IVA may be something to consider.
What if my circumstances change?
Even so, anyone's circumstances can still change in unexpected ways, and if this happens to you, it could affect your ability to make payments to your IVA.
If a big change in your circumstances does occur while your IVA is in progress, then an 'IVA variation' might work out for the best - for both you and your creditors.
Basically, an IVA variation is a new proposal that shows what changes you'd need to make to the way you're repaying your debt - so you can still bring the IVA to a successful conclusion, even though your circumstances have changed.
How does an IVA variation work?
Your IP is responsible for representing and supporting you throughout the entire duration of your IVA. Their job is to act in the best interests of both you and your creditors. If your circumstances do change, this may involve negotiating for an IVA variation.
If your Insolvency Practitioner feels an IVA variation is the best way forward, they will work with you to draw up a new proposal, which will be sent to your creditors for them to review.
Like your original IVA proposal, voting creditors who collectively 'own' at least 75% of your overall debt must approve the terms of your new proposal for the IVA variation to go ahead.
However, if the IVA variation is rejected, and you can't agree on a compromise, then the agreement will fail. In this case, you may want to choose a different debt solution, such as a debt management plan or bankruptcy.
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personal debt guide, visit my author area.
