An IVA (individual voluntary agreement) can be an invaluable resource for any individual person facing mounting debt. It offers the chance to protect yourself against action by creditors, and to structure repayments in an affordable way.
However, like any financial product, there’s the potential for abuse. The Insolvency Service has announced that it’s investigating whether IVAs are being mis-sold.
What is an IVA?
An IVA is a legally binding agreement to pay back debts over a specified period of time. There’s no minimum or maximum amount of debt that can be included under an IVA, but it must be set up by a qualified Insolvency Practitioner, who’ll charge a fee to do so.
An individual setting up an IVA undertakes to make the agreed payments. These are normally monthly instalments, although it could be a single lump sum — for example, if a substantial amount will be available at a specified date in the future. They also undertake not to make any further credit agreements over the period, and to inform creditors of any increase in income.
In return, the debtor isn’t charged any further interest on the debts, as long as payments are made as agreed, and they’re also protected against being chased for the debts.
What Is the Insolvency Service Investigating?
Even though IVAs provide a valuable debt solution for many people in trouble, it isn’t a universal solution. Debt charities have raised the concern that some Insolvency Practitioners are persuading people to go down this route when it isn’t the best solution for them. This can have a particular negative impact on the most vulnerable individuals.
The Insolvency Service has therefore commissioned research and a report into the procedures used to sell IVAs. In particular, the researchers will be examining whether there is poor-quality take-on with regards to IVAs — in other words, are they being mis-sold? It will also look at the form this takes and how common it is.
Once the research is available, the Insolvency Service will decide whether there’s a need to recommend changes to the framework of regulations.
How Might This Affect You?
In spite of doubts about mis-selling, IVAs remain a highly effective means of debt management. Not only can they be beneficial to the debtor, they can also ensure that the creditors recover more of their money than would be possible with most other approaches.
If you have a debtor you think might be able to repay you under an IVA, give me a call and I’ll work with you and your debtor to determine the best course of action to both. I also work with many Insolvency Practitioners, and I can recommend those who’ll deal fairly with everyone concerned.