Millions of people file for bankruptcy each year. Therefore, you should not be ashamed if you are in a position as to where you may need to file for it. Bankruptcy is a legal classification of the inability to pay your bills. Some chapters of it allow you to survive without paying all of the bills, and other chapters require you to pay back a portion of the bill. One of the main repercussions of bankruptcy is that you may not have access to credit for many years. You may be able to spare yourself some of the consequences of bankruptcy by first seeing if you can enter into an IVA with your creditors.
The Concept of an IVA
The acronym stands for individual voluntary agreement. The Individual voluntary agreement is an agreement that the debtor enters into of his or her free will. The agreement is a well-planned promise to all of the creditors that the debtor will repay them a certain way. Some debtors may offer to make weekly payments of a certain amount, and other debtors may offer to make monthly payments of a certain amount. The amounts that the debtor specifies in the agreement may be equal to any portion of the debt. The creditors have a right to approve or deny the request if you decide to make one.
Qualifications for Filing a Voluntary Arrangement
You do not have to necessarily agree to repay all of the debts that you owe to the creditor. Instead, you can promise to repay a certain portion of the debt. As long as you agree to the proposed amount, you just have to keep on making the payments that you promised, and all will be well.
How to Create an Agreement
You do not necessarily have to have an attorney to request an arrangement, but it is best if you do so. An attorney can speak to the creditors and negotiate with them about the terms of the arrangement. The attorney can then draw up the paperwork, too. You and the attorney will have to go to a creditor’s meeting with all the creditors who received a request to work out the individual voluntary agreement. At least 75 percent of the creditors have to agree to the terms before the agreement becomes a legally binding document. Once it becomes a legally binding document, all parties must abide by it. You have to pay what you promised, and the creditor cannot bother you.
The benefit of getting an individual voluntary agreement over bankruptcy is that an individual agreement won’t necessarily cause many years of credit problems. The agreement does not end up in a newspaper publication either, so you get to keep your dignity. Furthermore, the IVA may only last five years, and may only affect the credit score for five years. The effect of bankruptcy can last much longer.