IVA Illustrated Cases

Personal Finance

Individual Voluntary Arrangements (IVAs) are gaining a lot of popularity because of their flexibility and potential for profit and savings. More and more people are turning to IVAs as an alternative to bankruptcy. Read on to find out how some people have used IVAs to their advantage and paid off their debts without losing their assets and professional status.

Case 1

A highly-paid couple, married for eight years, had run up a debt of over 100,000 from paying the equity on their mortgaged home and their two cars. Despite their combined monthly income of $3,500, their living costs, including child care and existing loans, were too high. Given the size of their debt, a debt management plan would have taken them a good ten years to complete the settlements, even if their creditors agreed to freeze interest. Bankruptcy was a dreaded option, as they both worked in the financial sector.

They consulted an insolvency service, who suggested an IVA plan. The couple decided to give it a try, and the agency drew up a proposal based on their income and monthly expenses. After their living costs, mortgage, and car loan deductions, they were left with around £850 a month. Over the standard IVA period of five years, this added up to a total of 51,000, which their creditors agreed to take as full settlement of their accounts.

Case 2

Frank, a single man living with his parents, had acquired a debt of $50,000 over the years from a car loan and credit card purchases. He was earning $850 monthly, and after consulting a debt management company, Frank agreed to pay $350 a month on a payment plan, with 62 deducted for administrative fees to the company. A few months into the plan, however, he found that his debts were increasing, as his creditors were only receiving $290 monthly and the interest easily canceled out his installments. At this rate, he would have to keep with the plan for 15 years to fully settle his accounts.

Already considering a bankruptcy declaration, Frank consulted another insolvency firm and was given the option of an IVA proposal. The firm drafted a proposal requiring him to pay $310 monthly, all of which would go to his creditors. His creditors agreed to be paid $18,600 – the sum of five years’ worth of installments – as full settlement of his $50,000 debt.

Case 3

Another example of a well-executed IVA plan is the case of Jane, a 23-year-old single woman living on her own, with no children. She was earning a steady $19,000 annually, but over the years she had run up a debt of $34,000 from bank loans and credit cards. She planned to return to school and was looking for a way to settle her accounts by then. On her parents’ advice, she went into an IVA scheme, paying a manageable $300 a month for five years. This allowed her to settle her accounts with her creditors, with more than enough to send herself to college throughout the IVA term.