Relieve Debt with an IVA

Written by Admin on August 17, 2011 – 1:31 pm

One of the biggest advantages of entering into an IVA is the debt relief it provides on the successful completion of the agreement, and here is a brief explanation of the debt relief provided by the IVA Process.

An IVA, or Individual Voluntary Arrangement, is a fixed term repayment plan designed to assist people who are unable to maintain their financial commitments on their unsecured debts. Because an IVA is a formal debt solution, once agreed, the creditors are obliged to adhere to its terms.

Usually based over a fixed term of 5 years, payments are set to what is deemed affordable for the applicant and, as a result of this, there is a significant likelihood that the applicant will not be able to repay their full debt in the fixed time frame.

The IVA states, as part of the terms and conditions, that whatever amount is left unpaid at the end of the agreement will be legally written-off by the creditors, leaving the applicant completely debt free. In most cases there will be sizeable debt forgiveness, which, in some cases, could be as high as 75% of the original debt, once costs have been deducted.

Being a formal debt solution designed to act as an alternative to bankruptcy, an IVA provides the applicant with a realistic chance of regaining control over their financial affairs, which would be almost impossible if the element of debt relief was withdrawn from the process.

And for the majority of applicants, even though the option of bankruptcy would reduce the amount of money they would ultimately be required to repay to creditors, the option of being able to repay what they can truly afford over a longer period is actually preferred.

As a result of allowing the applicant to avoid the bankruptcy process, the creditors recover a greater proportion of the original debt, often considered a fair and realistic outcome.

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