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| Advantage 1 of IVAs |
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An
IVA provides protection to an insolvent Debtor
All the
unsecured creditors who are party to an Individual Voluntary
Arrangement (IVA) are bound by the terms and conditions of the
insolvency contract. Since the views of only the voting creditors are
followed, an unhappy creditor cannot take any legal action or other
enforcement to recover a debt but can submit a claim to the IVA
supervisor and get the dues as per the conditions specified in the IVA
contract.
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| Advantage 2 Of IVAs |
An
IVA is less expensive to undertake
Another
advantage of an IVA is that it is significantly less expensive in
comparison to a bankruptcy because the Insolvency Practitioner is not
required to deposit funds in the Insolvency Services Account as in the
case of bankruptcy proceedings against the insolvent debtor. In case of
a bankruptcy, the funds deposited in the Insolvency Services Account
attract levies and an ad valorem charge of 17% on all deposits made
after the initial £2,000.
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Bankruptcy
IVA
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A
Bankruptcy IVA
allows a debtor to avoid bankruptcy proceedings against him in case of
an
inability to pay back the debt to his creditors by opting for an IVA.
This
insolvency handling mechanism was introduced in the UK under the
Insolvency Act
of 1986 to allow a debtor to avoid bankruptcy proceedings and provide
an
alternate mechanism to take care of insolvency. A Bankruptcy IVA is a
contract
between the debtor and the creditors that outlines the terms for
repayment of
an outstanding debt. A debtor can avoid bankruptcy by opting for an
Individual
Voluntary Arrangement with his creditors under mutually agreed upon
terms and
conditions that are clearly specified in an IVA contract.
Bankruptcy
proceeding against a debtor is quite lengthy and tedious and is best
avoided by
the debtor as well as the creditors. In this context, an Individual
Voluntary Arrangement
provides an alternative to both the contractual parties for settling
their dues
in a fast and effective way. A Bankruptcy IVA is a legal contract
between the
debtor and the creditors supervised by a Licensed Insolvency
Practitioner that
outlines the terms and conditions for repayment of an outstanding debt.
An Individual
Voluntary Arrangement involves calling a creditors’ meeting
to discuss the
various provisions of an IVA contract. The meeting is supposed to be
attended
by all the creditors and a voting process is followed to decide on the
acceptance or rejection of the proposal submitted by the debtor in the
form of
an IVA contract. For a general acceptance of an IVA contract, more than
three-quarters of the creditors present at the meeting should vote in
favour of
the proposal. If any of the creditors present in the meeting are
associates of
the debtor, then at least half of the he remaining creditors should
vote in
favour of the proposal for it to be considered accepted by a consensus
among
the creditors.
An IVA contract
can be custom-made to suit the individual requirements of a debtor.
This makes
an IVA contract highly flexible in nature compared to bankruptcy
proceedings
that are very lengthy and tedious for the creditors in general and the
debtor
in particular. Due to the inherent advantages of an IVA, more and more
debtors
are turning to Bankruptcy IVAs to settle their debt with the creditors
on
mutually acceptable terms.
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| Advantage 3 of IVA |
No
Stigma attached with an IVA
An Individual Voluntary Arrangement (IVA) is a personal agreement
between a debtor and the creditors. A Bankruptcy, on the other hand, is
publicly advertised in a local newspaper and the London Gazette. In
this way, an IVA does not carry the stigma associated with a bankruptcy. |
| Advantage 4 of IVA |
No
dearth of future credit
Unlike a Bankruptcy, the advantage of an IVA is that it does not
compulsorily restrict a debtor from obtaining any future credit. A
bankruptcy debars an individual form having access to credit for a
specified period of time. This provision makes the bankruptcy
proceeding all the more painful because the credit history of the
debtor is blemished forever. However, there are no such issues in case
of an Individual Voluntary Arrangement. A debtor can get credit without
any restrictions even after signing an IVA |
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