The voluntary arrangement of the company is a legal way to deal with serious debt problems. It is a solution that helps insolvent debtors or who face serious financial problems to avoid bankruptcy. When debtors choose this solution and meet minimum standards, their debts are legally frozen. They pay what they can afford for a specified period, usually 60 months, and at the end of the period, the remaining debts are legally written off. During the 60-month period, no one can come after it as long as they pay CVA. With this good solution for people in serious debt, what could be a problem with CVAs? The company’s voluntary arrangement was adopted in law in 1985 and relatively speaking is a new legal instrument. Over the past two years it has become the preferred solution for many in financial difficulties, as well as increased the number of debt management companies the use of self-fuel; however, its popularity began to wane as people better understand company voluntary arrangement disadvantages of the company.
1). CVA is a complex debt solution that requires immense knowledge and skill to explain to the average person. Some companies are guilty of simplifying CVAs for customers to sell their services. This weak sales method has led people to choose this solution without understanding the requirements, implications and conditions for entering into individual voluntary arrangements.
2). Before accepting CVA, creditors vote on the debtor’s proposal and decide whether the debtor meets their criteria. In some cases, creditors may vote against the proposal even if the proposal has been prepared to meet their criteria. There may be justified reason for creditors to refuse, but the overall effect is more panic and tension for the debtor who is trying to solve the serious debt problem.
3). The impact on the debtor‘s credit rating is similar to bankruptcy. In fact, the debtor will have a weak credit rating for six years, after which the record will be deleted from its credit file. Paradoxically, a poor credit rating is good for the debtor because it prevents him from drowning more in debt as a result of his poor rating and inability to raise money.
4). Most of the company’s voluntary arrangements last for several years. company voluntary arrangement disadvantages is that The practical effect is that the debtor must adhere to a frugal lifestyle of budgets and audit his income and expenses. For some, this will be a very big challenge to avoid a 12-month bankruptcy.
5). One of the most attractive features of CVAs is that the owner of the home debtor gets his home. However company voluntary arrangement disadvantages is that the downside is required of the debtor to re-foreclose and release any shares available as part of the transaction. This additional erosion in housing rights and the additional complexity of the transaction may eventually lead to the debtor’s departure from the arrangement. Of course, this will lead to bankruptcy.