Pros
An IVA (Individual Voluntary Arrangement) allows individuals a way to make offers to creditors by using their income and assets to settle the debts they owe in full. The process is flexible, and it is also possible for individuals to exclude or include their assets and to decide how long the process is going to run. Find out more here: What is an IVA?
This arrangement allows the individual to retain physical control and legal ownership of all their assets rather than a bankruptcy where physical control and legal ownership will be passed to a trustee associated with the bankruptcy estate. Assets could be left out of this procedure: However, this is going to require agreement after all the creditors have met. If the person’s personal circumstance happens to change over the course of an IVA, there will be an opportunity to reconvene further meetings with the creditors so that they can consider a change to the existing proposal to accommodate personal circumstances such as when the person loses their income temporarily.
An IVA can also be used to help an individual to extract themselves from current bankruptcy provided that the creditors are in agreement to use this process. This means that the proceedings for bankruptcy will be annulled and replaced. This means the bankruptcy is also going to be wiped off the individual’s record like it had not occurred.
The expenses and costs of an IVA are often a lot less when compared to the fees associated with bankruptcy. When alternative trustees or the Official Receiver in bankruptcy realises the assets, the scale rate which is usually at 15% of all the realisations is going to be charged for each of the realisations in the bankruptcy. But when an individual works with a supervisor of an IVA, this will facilitate a much easier realisation associated with the assets. This often minimises costs, while making the procedure look more appealing to creditors.
Cons
The main potential con involves whether it becomes possible for an individual to actually implement terms of an arrangement that were agreed on originally with their creditors. If changes occur to your job or personal circumstances and you cannot implement terms associated with the scheme, you will have to rely on your creditors to agree at the next meeting that you will be allowed to change the terms of your IVA so that you can remedy what would usually be regarded as breaching the arrangement.
If you cannot remedy the breach, due to what your creditors view, the supervisor might be forced into filing a Bankruptcy petition order against you.
It is important to note that an IVA is classified as a “formal insolvency” process. This means it will be stated on your credit record. It will also have negative effects on your credit score while its current, impacting any of your abilities to obtain bank accounts, credit, etc.