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Individual Voluntary Arrangement (IVA) could be your way out if you are struggling to repay your creditors. This arrangement can prevent your home, business and other assets from being taken over by the people whom you owe money. By paying a fixed monthly installment for about five to six years, you can get your creditors to write-off your remaining debt. If this sounds like an ideal solution to your debt woes, then read on to learn more about Individual Voluntary Arrangement.

We have consulted some law experts at nolo.com to throw some light on this legal arrangement that you can take advantage of if you are in a financial difficulty. There are some viable options open before a debtor to get the debts restructured in a way that makes it possible to pay them back. Consider each of them carefully and go for the one that seems to be suitable – given your individual circumstances. Here, we will take a more detailed look at IVA.

If you want to enter into an IVA, you need first to solicit the help of an insolvency lawyer who will help you prepare a proposal that is based on your statement of affairs. By applying this at the court, you can stop your creditors from initiating the procedure to repossess your assets. If the proposal is found to be sound and reasonable, then a meeting of the creditors can be called to put forth the proposal for their approval. If 75% (of the total debt value) of the creditors approve, then you can enter into an IVA.

The monthly payment you have to make would be fixed after taking into account your income, expenditure, total debt and other specific circumstances. This assessment would be conducted annually throughout your IVA term. Should the conditions change or the living expenses increase during the term of your IVA, then you may request your creditors to reconsider the terms that were originally agreed upon. If your situation is found to have improved during your annual review, you may be required to increase your monthly payment to your creditors.

After the final payment is made, all the debts that were included in the agreement would be discharged. But, the debts that were not included will still have to be paid off. Some debts like court penalties, student loans, court fees for family court proceedings, etc. cannot be included in the IVA. A homeowner might be asked to re-mortgage your property 6 months before the end of your IVA term. If you find it difficult to remortgage, then you will have to pay a maximum of 12 additional payments. Alternatively, a third party may offer a sum equivalent to the equity.

If you fail to make the monthly payments agreed upon in the IVA, then your creditors might backdate the interest on your debt or may move the petition for your bankruptcy. Once you enter an IVA, your expenditure would be restricted and you may be expected to cut down on your spending if it is found to be excessive by your creditors.

Study the pros and cons of an IVA carefully before you enter into one.