Individual Voluntary Agreement Definition

Individual Voluntary Agreement Definition

An individual voluntary agreement definition is basically quite simple. This is because the individual voluntary agreement is nothing but a formal contract that pertains to a debt solution in which the objective is to help those individuals that have an overwhelming debt issue. The objective of the agreement is to get the debtor and their creditors to arrive at an arrangement in which the former agrees to pay monthly installments for a definite period of time. After this period of time expires, all the debts will be cleared – including the unpaid part of the debt.

Individual voluntary agreement – agreement must be proposed

Another aspect of an individual voluntary agreement definition is that this agreement has to be proposed and also administered by a professional known as an Insolvency Practitioner. Yet another way of looking at an individual voluntary agreement definition is to find out how a person qualifies to enter into such an agreement. Essentially, only those people whose circumstances match the eligibility criteria will qualify for an individual voluntary agreement.

Eligibility criteria

Therefore, part of the individual voluntary agreement definition is that it must lay down the eligibility criteria. This criterion includes that a debtor must owe at least twelve thousand pounds to at least three separate creditors. In addition, the debtor must have sufficient income and should be in a position to pay back at least twenty-five percent plus costs of the amounts owed.

How is it different to a bankruptcy?

Another aspect of an individual voluntary agreement definition is that it must explain how the individual voluntary agreement is different to a bankruptcy. A basic individual voluntary agreement definition will explain that the individual voluntary agreement is an alternative solution to bankruptcy.

The term of an individual voluntary agreement is an important factor. Therefore, an individual voluntary agreement definition would be incomplete if it did not explain what the pre-determined life of an individual voluntary agreement was. Normally, the life of such an agreement cannot exceed five years but under certain circumstances there is scope for increasing the life to beyond five years and even to shorten it to less than five years.

An individual voluntary agreement definition will also need to explain what happens at the end of the life of the individual voluntary agreement. Typically, once the life of the agreement expires and if all monthly payments were made, and then the debtor will be freed from all their debts including the portion of debt that has remained unpaid.

Another important aspect of an individual voluntary agreement definition is one that relates to what happens should the debtor fail to make their payments. An individual voluntary agreement definition will show that a debtor is allowed to only miss up to two payments. Should they miss more than these numbers of payments, they will risk being in a failed individual voluntary agreement which will have its own set of negative consequences.

Once a person understands an individual voluntary agreement definition, they will then be in a better position to judge whether such an agreement is worth entering into. They should therefore understand the major points of an individual voluntary agreement definition, especially those points that related to the advantages that an individual voluntary agreement offers to the debtor.

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