Individual Voluntary Agreement

Individual Voluntary Agreement

An individual voluntary agreement is an excellent alternative to declaring bankruptcy in the UK. These agreements provide a debtor with an excellent opportunity to arrive at an agreement with their creditors and more importantly also allow the borrowers to hold onto their most important assets such as their homes.

Individual Voluntary Agreement – devised in 1986

The earliest individual voluntary agreement was actually devised way back in the year 1986 and was meant to provide people in the UK with an alternative solution to declaring bankruptcy. Furthermore, an individual voluntary agreement is also a formal as well as binding agreement that an individual enters into with the people to whom they owe money. Mostly, an individual voluntary agreement is restricted to just debts that are not secured.

No need to file for bankruptcy

A debtor can opt to enter into an individual voluntary agreement instead of declaring bankruptcy and in this way can protect their main assets. However, it does depend on the debtor's circumstances and mostly the debtor will be able to hold on to their homes and cars which is not the case when filing for bankruptcy in the UK. Creditors also benefit from entering into an individual voluntary agreement as they can receive much more money and in this way can minimize their losses. If the debtor files for bankruptcy then the creditor will not get back as much money as they do when the debtor enters into an individual voluntary agreement.

IVA or bankruptcy?

It pays to understand the main points of difference between an individual voluntary agreement and a bankruptcy. The former is much more flexible and involves entering into a legal agreement with the creditor and the terms of the agreement can be negotiated by the two parties. This helps to ensure that the individual voluntary agreement can be formulated to suit both parties and so is a better option than bankruptcy. In case of filing for bankruptcy, the debtor can still negotiate for an individual voluntary agreement. This will annul the bankruptcy.

Five year agreement

However, there are a few drawbacks to entering into an individual voluntary agreement. Most importantly, such an agreement lasts for as many as five years whereas the bankruptcy only lasts for one year. Also, the individual voluntary agreement is costlier than a bankruptcy as the former involves two main costs. The first is called the Nominee's Fee which will be recovered from the debtor when they make their repayments and the second fee is known as the Supervisor's Fee which must be paid out from the repayments and on a regular basis.

If you are looking to enter into an individual voluntary agreement you will need to start off by obtaining some expert advice from a professional. You can get this advice from the Citizens Advice Bureau that will provide tips and help and advice regarding the benefits and drawbacks of the individual voluntary agreement.

Once you are sure that you want to enter into such an agreement then you must get in touch with an Insolvency Practitioner who is licensed to practice. Next, it is time for the creditors to agree to such an agreement. After the agreement has been approved the Insolvency Practitioner will oversee the agreement and ensure that you will stick to your part of the agreement.

Back to Top