Talk:Individual Voluntary Arrangement

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I believe Ostrich are a commercial organisation.

Looks like it - now removed! Brookie :) - a will o' the wisp ! ^(Whisper...) 08:08, 29 January 2007 (UTC)

I don't think that "poundage" as it is used in this article refers to the definition that is currently linked to, rather that the creditors make the decision based on a specified number of pence in the pound that they will agree to reduce the debt payable to. OK to remove the link?

--Tirian 22:13, 12 May 2007 (UTC)

Sorry, I've never tried to contribute to Wikipedia before so hope I'm doing right thing!

There are couple of things I think could be explained. Technically speaking, more than 75% of creditors must accept the proposal - if exactly 75% approved it, by the wording of the legislation it would be rejected. There are a number of differences between IVAs and bankruptcy, for example cost, duration (IVAs typically last 5 years, bankrupts are automatically discharged after just 1 year), IVAs enable traders to continue trading and can provide for them to obtain credit, and importantly Bankruptcy and IVAs are not mutaully exclusive.

There is also an interesting debate between insolvency practitioners and creditors (mainly the big banks). Although the banks get a better return under an IVA than Bankruptcy, they increasingly believe that those debtors who opt for an IVA never had any intention of going bankrupt, so in fact they would be better off rejecting the proposal under the assumption that the debtor will choose a different option providing a better return (eg. a consolidation loan from another bank or a debt management arrangement). They are also stipulating minimum dividends as their 'voting criteria' to force debtors to pay more or face having their proposals rejected. Banks are also concerned about how much money the IVA firms are taking themselves, so more and more frequently choose to accept the proposal only on the condition that fees taken by the IVA provider are capped.

Insolvency firms argue that the banks should act more responsibly when lending to people, so they only have themselves to blame. They also argue that because of the highly regulated nature of their work, and the fact that they have to supervise the arrangements for five years, their fees are reasonable, especially when compared with other similar professions such as solicitors and accountants.

For the debtor, an IVA may seem like an easy option, especially as a result of the type of advertising that so-called 'IVA factories' have recently adopted. However, an IVA is a serious legally binding contract. The debtor will be subject to financial sucrutiny for a full five years, with their income and expendiutre being reviewed annually, windfalls (such as inheritance, bonus payments from work and tax repayments) must be paid over to the IVA firm for the benefit of creditors, and even their bank statements are reviewed and any out of the ordinary transactions must be explained.

The benefit for the debtor is that he or she gets a substantial amount of their overall debt written-off, interest and charges stop, and the telephone calls and letters stop coming. The debtor pays an amount that is based on his or her disposable income, rather than the amount he or she owes.