It is pretty common for businesses to face financial problems and difficulties. However, when businesses are facing financial difficulties, it can be difficult for them as they are liable to pay off their debts. And, if the debts are not paid right away, debts can continue to grow, which can cause bankruptcy. In such situations, an IVA-Individual Voluntary arrangement is an ideal option.
IVA is a manageable solution for traders struggling with debt issues without selling out their properties. Instead, it is an insolvency tool that asks creditors to cut back some financial pressure. Read on to find out everything you need to know about IVA-how does it work, and how to apply for an IVA:
What exactly is IVA?
An IVA-Individual Voluntary Arrangement is like an agreement between creditors and sole traders. It is a formal procedure established as a replacement for bankruptcy. Also, it is considered the best option for sole traders as it protects their assets.
It is a legal deal that enables sole traders to pay off their debts from their future profits-between 5-7 years. Debts that can be paid off via IVA are credit card debts, personal loans, or unsecured loans.
With the help of IVA, you can only repay the affordable amount, and once the IVA period is over, your remaining debts are written off. IVA is considered a moral, ethical, and regarded way to deal with your debt issues and avoid bankruptcy. Also, it is beneficial for creditors as with bankruptcy; there are high chances for them to receive nothing.
How Does an IVA Work?
IVA is insolvency like bankruptcy. Though, they work in a different way. IVA is prepared only by a financial expert who is qualified enough to deal with your creditors. Your financial expert will represent your repayment plan to your creditors. If you and your creditors agree to the repayment plan, the agreement is legally binding, and both parties need to adhere to it.
It would mean that you have to make the monthly payments per IVA plan, and the remaining debt will be written off. Usually, IVAs last for 5-7 years, depending on the size of your debts and circumstances. Once you repay all the debts under the IVA period, you will be given a completion certificate, and your IVA record will be removed from the insolvency list.
How to Apply for an IVA?
If you want to apply for an IVA online, you should seek financial advice. A financial advisor will help you decide whether applying for an IVA is the right option. If it is, you have to fill out an application form that will include creating a repayment plan. This proposal will be based on your financial situation and the debt you owe. The proposal should be beneficial enough for both parties.
Then, this proposal will be represented to the creditors by your IVA provider. If creditors approve your repayment plan, you will be legally bound to pay off the IVA period. Also, you will be required to hire an insolvency practitioner to handle all your IVA proposals.
Pros and Cons
With IVA, there are several advantages and disadvantages involved. Therefore, you should weigh its pros and cons before deciding whether it’s the right option for you:
- Interest on debts will be frozen.
- More protection for your business and its assets.
- Your remaining debts are written off at the end of the IVA period.
- Your firm will be included in the insolvency list.
- It might not be easy to obtain future credit.
Managing debt can be stressful once you are facing financial difficulties. However, with IVA, you can make a real difference by paying off your debts while protecting your assets. Also, IVA lets you write off debt that you can’t afford.
With IVA, you can make monthly payments depending on your financial situation.
One simple monthly payment is far better than managing multiple payments to your creditors!