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Why IVAs Have Increased During the Recession
We take a look at reasons why so many people are taking advantage of the IVA during these times of recession and tremendous financial collapse.
Whereas there have always been a percentage of the population who used the bankruptcy laws to address extreme financial stress, that phenomenon did not impact the general population dramatically. The credit crisis of the last few years has changed all that.
There is virtually no family that has not been impacted by the dire financial times we are in. As many thousands of people face the stark financial realities of not being able to pay their large credit card debts, the IVA has been a real godsend. It is safe to say that if everyone who was in severe credit trouble were forced through the bankruptcy system it would cause serious problems for the economy as financial providers lose billions more.
So the IVA has served to give both debt burdened individuals and creditors a way out of financial difficulty.
IVA over bankruptcy
The IVA system is not as severe as a full bankruptcy for many reasons. As the IVA is being set up, the individual in debt works with a professional IVA agent to negotiate with his or her credit card companies to agree to a payment schedule that the individual can actually afford and that payment schedule is put in place for a lengthy period of time, usually five years. One of the tremendous values of a negotiation like this is that the entire IVA process is the business of the individual and the interested parties only.
When a person goes through a bankruptcy, the details are published for everyone to know about which adds additional stress to an already very difficult time. But that public disclosure does not occur during an IVA discussion. The entire process is confidential so the person in debt can restructure his or her debt situation and not see any real disruption to their daily lives. When the IVA is done, nobody is the wiser but the individual has a financial plan in place that they can live with.
Greater benefits
What may be of even greater value is that there is no mandatory impounding of the debtors possessions to satisfy an IVA. You get to keep your house and what you need to live on. The loss of the home and so much of your wealth during a bankruptcy is one of the reasons it is such a dreaded outcome of a battle with debt. An IVA is much less severe and it allows the debtor to work toward the resolution of their debt in a civilized fashion.
Financial service providers
Lending institutions have seen the explosion of the use of the IVA as a godsend as well. Without the IVA structure, many thousands of citizens would be going through bankruptcy. That would result in huge sums of money that is owed to the credit card companies disappearing. The impact on the credit agencies ability to continue to function would be huge. But with the IVA system, each IVA can be set up to return some of the money that is owed to the financial institutions involved. While some of that debt may be written off at the end of the IVA cycle, the IVA system allows credit card companies to continue to function and recover from this credit crisis right along with private systems. That is why it is so important that the IVA system be preserved and that anyone who is facing serious debt related crisis learn about it so they know where to turn to avoid catastrophe.
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