What is an IVA?

An Individual Voluntary Arrangement or an IVA as it is better known, is a debt solution mandated by law and which will allow you to deal with your creditors and debts so they can be written off and repaid without the need for a messy bankruptcy.

Firstly, who are they most suitable for?

The typical IVA applicant is in a position where they cannot pay off everything but they can pay at least a couple of hundred pounds a month towards their debts. Realistically, bankruptcy is not going to result in a materially better situation for the creditors when it comes to getting their money back and so the IVA route allows them to recover something without the cost and time involved in bankrupting you – plus it’s good business sense for them as bankrupting people does not make you popular!

The IVA itself is a legally binding arrangement approved by the court and which is managed and established by a licensed practitioner who will handle all the paperwork and legalities on your behalf.

At least 75% of your creditors must approve the arrangement – this is done by value so if you have one creditor to whom you owe more than 75% of your total debts and they say go ahead then you can no matter what the others say about it.

The creditors agree to a reduced payment schedule fixed for a number of years, typically five but it can be shorter; all interest is frozen and is no longer applied. You then make a monthly payment rather to multiple creditors and any CCJ's or other court action against you is stopped. Best of all you do not need to sell your home, it will not affect you in your job and if you stick to the repayments all the remaining debts are written off.

Notes of caution

• Never enter in to any debt solution with out getting professional advice.
• IVA's may be better for your creditors, but may not be best for you, especially if you're not a homeowner, so get good advice
• Debt solutions are available if you're in serious debt, but managing your money on a budget is another essential part of becoming debt free.