An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors. It is negotiated and set up by a licensed Insolvency Practitioner (IP), who administers it over the full term.
Once terms have been accepted by a minimum of 75% of creditors, the agreement becomes legally binding and they will no longer be able to pursue you through the courts. Interest and charges on the debt are frozen, and at the end of the agreement any monies still owing will be written off.
The appointed Insolvency Practitioner is the point of contact for creditors, relieving you of the stress of dealing with them. The IP takes their fee from the monthly repayment amounts, which are calculated according to your income once household and living costs have been taken into account.
Although Individual Voluntary Arrangements are only applicable in England, Wales and Northern Ireland, a similar debt solution exists in Scotland – the Trust Deed, or in some cases, the Protected Trust Deed.
The similarities between an IVA and a Scottish Trust Deed include:
One of the main benefits of entering into either of these insolvency procedures is the fact that your creditors are unable to pursue you through the courts for debts included in the agreement.
This, in addition to the fact that interest or charges cannot be applied, allows you greater control over your finances without the worry of the total debt increasing. Making one single monthly payment rather than trying to meet several demands each month also lessens the pressures of being in debt, and allows for more effective budgeting.
With any type of insolvency solution, your credit rating is always going to be adversely affected. A Scottish IVA, or Trust Deed, will appear on your credit file for a period of six years. During this time you may find it difficult to obtain further credit, but once six years has passed you’ll be able to start rebuilding your credit rating.
Any property that is mortgaged or owned outright will form part of the agreement, and may need to be sold. This is by no means certain, however. Sometimes equity can be released via a remortgage, or if a family member is interested in making an investment in your property.
Failing to keep up Trust Deed repayments is a breach of the agreement, and may result in enforced bankruptcy by one or more of your creditors. Furthermore, this is a public process so your name will be entered into the Register of Public Insolvencies for the term of the agreement.
Trust Deeds generally last for four years, and can provide a little financial stability if you have taken on unmanageable debt. During this time, although funds will be restricted, you know that at the end of the term the remaining amounts owing will be written off and you will be debt-free.
Scotland Debt Solutions can offer advice on the correct solution for Scottish residents struggling with debt. Our professional team works from five locations around Scotland, and offers a free initial consultation to discuss your situation.
The government has introduced a range of measures to help individuals, families, and sole traders in Scotland who are struggling to cope financially due to the coronavirus pandemic.
When you apply for a personal loan it’s important to be open with the lender and tell them exactly what the loan is for.
Our Scottish based team can help advise you on your debt problems.