INDIVIDUAL VOLUNTARY ARRANGEMENT: A BANKRUPTCY ALTERNATIVE

2007-03-08 10:33:40

( Health )



Bankruptcy is a debtor’s last resort. It is in the debtor’s own interest to explore all possible solutions first. One option is the Individual Voluntary Arrangement.

An Individual Voluntary Arrangement is an alternative to bankruptcy that allows you to make a formal proposal for payment to your creditors. It is a legally binding agreement that is supervised by a licensed insolvency practitioner.

In an Individual Voluntary Arrangement, you offer to repay a percentage of your debt over a designated period of time, usually 5 years. Once the Individual Voluntary Arrangement is completed, the debtor will be declared debt free.

The Individual Voluntary Arrangement can be designed to suit your personal circumstances. Calculation of your monthly contribution would take into account your earnings and expenditures plus your assets and liabilities.

It is important that you get the consent of your creditors to exclude your properties from the proposal. This is to protect your assets from being at risk in case you fail to adhere to the terms of the Individual Voluntary Arrangement.

To reach a compromise, your creditors should stand to receive a larger amount than could be expected if you decided to file for bankruptcy instead. An Individual Voluntary Arrangement is preferred more than a bankruptcy because aside from the higher returns, creditors can also claim tax relief.

Unlike bankruptcy, an Individual Voluntary Arrangement imposes no restrictions that could prevent you from serving as a company director or joining the armed forces. Business owners are also allowed to continue to trade and generate income.

But bear in mind that voluntary arrangements are recorded in the DTI register. It may adversely affect your credit rating should it appear on your credit file.

Before considering an Individual Voluntary Arrangement, make sure that a realistic proposal can be made. Remember that it would be more difficult to avoid bankruptcy if the Individual Voluntary Arrangement does not succeed.


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