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If you find yourself faced with debt from numerous creditors, chances are you have given an individual voluntary arrangement some thought. If you haven’t, you might not even know what one of these arrangements, also known as IVAs, are or how they function.

An IVAadviceco partners you with an insolvency practitioner that works essentially as a middle-man between you and the agencies to which you owe money. With all of your personal assets, income and debts in mind, the practitioner creates a payment schedule that has to be agreed upon by no less than 75% of the creditors that are seeking repayment. Once this has been accomplished, all of a person’s existing creditors will be legally bound to the agreement as you repay incrementally until your debt is gone.

This is a popular means of avoiding a declaration of bankruptcy while resolving outstanding debts. But what are the benefits and disadvantages of entering into an IVA? These are the things that you should know before seeking out an insolvency practitioner with whom to create one of these flexible agreements.

Advantages:

• All creditors are legally bound to the terms of the IVA. This means that, once the IVA is in place, they cannot take any further legal action against you.

• You get between 5 and 6 years to repay your debts, rather than mere months to a year.

• It’s possible to retain your assets, like vehicles, your home and any businesses that you own.

• Your monthly payments are based on your income and assets, as to remain affordable.

• The insolvency practitioner works on your side to guide you through this process and keep you in the know as your IVA is formed, and as it proceeds over the years until paid in full.

• Creditors get more money from you than they would if you had initially chosen to file for bankruptcy.

Disadvantages:

• IVAs can be quite strict, with a contract of 5-6 years that may require an annual review of your expenditures.

• Entering into an IVA could violate the terms of employment in some professions, so check your employers’ rules about such matters.

• If you find yourself suddenly unable to pay the monthly payment owed to the IVA, your insolvency practitioner could start you on the process toward bankruptcy.

• From the day that the IVA begins, it will be present on your credit rating for 6 years. This will affect not only your credit score, but how much you can take out in terms of lines of credit.

• While you won’t be forced to sell any property, many who enter into an IVA find that they need to re-mortgage their homes.

• There are other fees associated with an IVA: a one-time startup fee and a handling fee that is applied to every monthly payment.

As you can see, there are a lot of good reasons to opt for an individual voluntary arrangement. However, there are still quite a few solid reasons to be wary of it as well. If you have debts that need to be resolved and are considering an IVA for this purpose, speak to an insolvency practitioner today before you make the leap.