Individual Voluntary Agreements

Agreements between a creditor and debtor to modify the terms of the debt have a special name in the United Kingdom; Individual Voluntary Agreements. IVAs are a way for a debtor to make an alternate arrangement to pay a debt on different terms then the original; often because they cannot pay the debt in full and it’s overdue.

In the United Kingdom there exists a more formal structure for making debt negotiations than does in the United States. The UK employs Licensed Insolvency Practitioners to settle debt negotiations; something that lawyers or debt counselors might do in the US.

When making debt arrangement seldom is it ideal for either debtor or creditor but it’s better than a total loss for either side. IVAs involve setting new terms and conditions for debt repayment and often the creditor accepts a lower amount that the original debt. In some cases the interest rate is adjusted. IVAs are tailored to each individual person and situation.

Such agreements are advantageous to the debtor as it relives some of their stress over finances. They gain relief from legal actions against them. They can stop thinking about bankruptcy declarations and the hassle associated with them. It also provides the debtor with hope that they will actually be able to repay the debt.

The creditor also receives a benefit from these agreements. Although they rarely receive the original amount they are owed they can often times bring in more money than originally expects as they can lengthen the term of the loan. IVAs often involve an agreement to pay a percentage of the original debt.

While this is not an ideal situation for the creditor, this way they can at least recuperate a partial sum. Recovering a portion of the past due debt is better than recovering nothing at all. If they don’t make arrangements they either lose out completely or they end up paying legal fees if the debtor declares bankruptcy.

IVAs in the UK are formal arrangements made via the court system rather than informal deals worked between the two parties as in the US. If you are in the US negotiation debt you should ensure that any and all agreements between you and the other party are placed in writing. This will give you legal recourse should the other party not stick to the terms of the arrangement.

Link to this article:
<a href="http://www.omitdebt.com/Individual-Voluntary-Agreements.php" target="_blank">Individual Voluntary Agreements</a>