An important clause behind the IVA
Many people are becoming aware of an important clause tied up in an IVA agreement known as the 24 month no variation clause.
This important stipulation means that IVA contributions cannot be altered for the first 24 months of the agreement, this is legal binding and there can be no variation meeting to alter this set condition.
The clause has been put in place to protect creditors so as they are guaranteed a fixed sum for two years. Otherwise an Insolvency Practitioner (IP) could set up an IVA proposal for a debtor to return 40p in the pound to creditors but call a variation meeting shortly after the IVA has been approved and lower the monthly payments to 35p or even 20p in the pound due to a change in the debtor’s circumstances. This means that an IVA has to be budgeted for realistically so as both debtor and creditor are aware of a fixed monthly payment that they can comfortably afford to pay out/receive each month.
Although this may seem harsh to people who become ill or lose employment, it is simply a way of keeping an IVA an effective and reliable debt solution
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If exceptions were made to certain circumstances, people would soon start finding further ways to exploit the system and an effective debt solution could lose its credibility. Therefore, it is vital that anyone seeking an IVA is sound in the knowledge that it is a legally binding contract and that they have to cope on an agreed tight budget for at least 24 months.
