IVA - An Explanation

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by: Paul Robgher
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Word Count: 372
Date: Wed, 16 Sep 2009 Time: 2:17 PM
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An IVA is a Individual Voluntary Arrangement which is an option which gives consumers the chance to be able to avoid a bankruptcy. The process that is set up allows people the chance to arrange an IVA with their creditors. What exactly does an IVA do for a person or their family? What does it do for the creditor that is owed money? What are some of the advantages and disadvantages associated with it? Is the use of IVA's on the rise?

An IVA is an agreement that takes place between a debtor and a creditor. There is an incentive for both parties to attempt to take part in a IVA. The benefit for the consumer is that it gives a debtor a chance to restructure their debts without the pain and embarrassment that a traditional bankruptcy brings with it.

One of the advantages of taking part in an IVA is that it is a private agreement between a creditor and a debtor. A IVA will not be placed in the local newspaper like a bankruptcy would be. In addition, when a person takes part in a IVA, they may still be able to obtain additional credit if they need it. It depends on the credit score and the payment history of the individual on whether they would be able to get that credit or not. An IVA will also not affect a credit score as bad as a traditional bankruptcy would.

While there are some advantages to an IVA, there are also some disadvantages. An IVA would last as long as 5 years, which is much longer than a bankruptcy would. A normal bankruptcy last a year or so. In addition, a person that needs to have an IVA is likely to have a very low credit score, which hurts that person in a number of ways.

Due to the poor economic health of the UK and the world economy in general, the number of IVA's that have been taking place are on the rise. This is because more families are struggling and that the IVA option allows the debtor the chance to avoid bankruptcy.

About the Author

Paul Robgher writes for debt-free.org.uk and takes great pride in helping people to be debt free