IVA - Individual Voluntary Agreements

In the United States a debt handling consultant can go by many different names, such as debt consolidator and debt counselor. However there are other professionals that can also be of assistance when it comes to managing your debt such as lawyers. There is a name for the agreement that is signed between the debtor and the creditor, however it only has a specific name in the U.K. It is called an IVA or Individual Voluntary Agreement.

An IVA is a legal binding contract between the credit agency and the individual that has the debt. This contract admit the debt and promises for repayment on the debt. More often than not the original terms of the debt can be changed in an IVA in order to better meet the financial hardships of the person in debt. Generally allowing for a reduced amount of repayment.

In the U.S. these types of agreements can be made without a professional, however it is in the best interest of both parties to have an agreement in writing with the new terms of payment. In the U.K. it is required to have a licensed professional handle the paperwork and bring it through the court systems in order for it to be a binding contract.

Even though the creditor is making the balance lower they are also getting something in return. They are allowing for smaller payments over a longer period of time which in turn increases the amount of interest they receive over the period of the new agreement. Usually the interest rate is reduced on the repayment and the allotted time is extended so they are still making out fairly well.

The individual in debt with the company also make out fairly well by utilizing the IVA. They are no longer in jeopardy of having legal action taken against them by garnishing their wages, the danger of losing their home or other assets are also minimized by such agreements. Once the person in debt has agreed to the terms it is very likely that they can not only afford the payments but that they also are able to move past the hard times they went through.

Even though it might seem as if the creditor does not really have much incentive to make such agreements, they actually do. They are able to avoid costly legal expenses and the risk the individual will file for bankruptcy. This makes the absolute most sense to all involved. The person in debt is able to now make the payments and the creditor can get some of the money owed to them.

The biggest positive to an IVA for the person that has acquired the debt is the burden of trying to file for bankruptcy is no longer needed. They are able to move beyond the mishap and continue to make payments. Also, the entire process of bankruptcy is time consuming, costly and in some cases embarrassing. Not to mention it generally will ruin your credit score for around the next ten years.

         

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