Introduction to IVA
IVA stands for individual voluntary arrangement. Generally an insolvency practitioner who is a licensed professional can only set up this arrangement
due its formal nature. The IVA is an arrangement between an individual and his creditor where an agreement is established as per which the individual
comes to an arrangement with those to whom he owes money to make payments towards the debt owed in order to pay off a percent of what one
owes, generally after a period of five years of which the debt is classified as settled.
The main purpose of such an agreement is that it is legally binding in nature. In times of financial crisis it helps in making formal proposals to creditors
in order to settle off the debts. The arrangements are based on monthly payments & the outstanding debt gets written off legally once the final
payment is made. Depending on the circumstances, such debts can be written off to the extent of 65% with such arrangements. The debt gets settled
within a fixed period of time, generally spread across a period of five years. Creditors can not demand any additional payments as all interest charges
& debt charges get frozen during this time period. How these IVA schemes work is simple. One needs to evaluate if an IVA is right or not for him. If
yes, then the next step is to evaluate the current financial position & a detailed explanation of the same is required. After the current financial position
is reviewed, the repayment amount will be decided after discussion of the same. After this the individual seeking respite will have to check and sign the
proposals set up and the same will then be returned to the insolvency practitioner.
Now even the court can be approached and an application can be made for an interim order so that the creditors can be barred from taking any legal
action against the individual. However, this agreement will get approved only when at least a creditor votes for the agreement or else it falls apart.
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IVA stands for individual voluntary arra