Getting Out Of Debt With The Help Of The Insolvency Act 1896

Getting Out Of Debt With The Help Of The Insolvency Act 1896The Insolvency Act 1896 governs parties, processes and requirements for settling debt and is the legislation that made it possible for people to use the Individual Voluntary Arrangement (IVA) for this purpose. Consumer rights and legislation are protected by the Office of Fair Trading. In this way, debtors are protected from action taken by creditors who may otherwise harass them.

IVA

IVA is the plan used by debtors who enter into contracts that allow them to repay debts using a flexible plan. Debtors must first solicit the services of an Insolvency Practitioner who will then serve to represent them during legal proceedings. They will then contact creditors to form an action plan and keep them regularly updated through the Insolvency Practitioner of their choice. If any changes are required, they must also inform them of that.

IVA Legislation

Unless the IVA legislation was in place, any Individual Voluntary Arrangements would simply be another plan. With the protection offered by this legislation, consumer rights are protected and overseen by the Office of Fair Trading. After approval has been given, the IVA is binding on creditors who must abide by the terms of the contract without continuing to pursue the consumer for repayment of debts.

The debtor is also bound by this arrangement and must fulfill their part of the bargain within the set amount of time. If they don’t, the protection given by the IVA is terminated and they make themselves liable for prosecution. This is particularly true if they have provided incomplete or false information.

What Affects the IVA Process?

The entire process can take from a few weeks to several months to complete with all the legal processes that are involved. To a large extent, when it becomes effective depends on whether the debtor contributes complete and accurate information. It is also dependent upon striking a consensus between them and their creditors.

If the Insolvency Practitioner believes that they have received incomplete information from the debtor, they must ask for additional details and the Insolvency Solicitor or court can send the application back requesting the same. If creditors are not swift about giving their approval on the proposed IVA, they may also ask for modifications. At this time, debtors will be asked to start from scratch and modify their proposal before offering it for approval again.

The IVA Process Step by Step

Preparing necessary documentation

To begin with, debtors must draft a Statement of Affairs after reviewing their debt settlement options and selecting IVA. This draft spells out debts, assets, income and other revenue as well as creditor information at the date the document was prepared. When this is ready, they are ready to enlist the services of an IP who will evaluate the document along with the proposal of how debtors finances will be handled after getting approval for IVA.

Application to IS and Court

Once the information within the IVA proposal has been verified by the IP, they will go on to apply for IVA with the Insolvency Service and the local court for their client, the debtor. The intention of these applications is to understand what the debtor is trying to accomplish and help protect him from any action taken against them by creditors until they have a status change. If the individual qualifies, the court will receive a go-ahead from the IS to proceed with arrangements before issuing an order that creditors must back off.

Meeting with creditors

Issuing a court order of this kind temporarily prevents creditor action. For this reason, a meeting with creditors is a must. Their agreement to the proposal must be sought before the arrangement goes into effect to protect debtors. Still, debtors must abide by all terms if an agreement is reached. If creditors do not approve the proposal, the IVA must then go back to court to have the restricting order lifted.

Even after approval, an IVA can be terminated if the participating IP sees that the debtor has engaged in fowl play or has failed to honor the agreement.

Conclusion

The Insolvency Act 1896 is what gives the IVA its power to help debtors propose a means of repaying debt. It is tailored to the individual’s financial circumstances. This is nothing like mere word-of-mouth agreements, and with IVA legislation it is legal and binding to creditors as well as those who owe them money. Consumer rights are protected by the Office of Fair Trading and that includes debtors who attempt to get out from under oppressing debt by acceptable legal means.

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