Individual Voluntary Arrangement

Debt can lead to more than just money problems, and so the concept of bankruptcy can be an attractive option as a last resort. Individual voluntary arrangement, or an IVA as it is often abbreviated, is the alternative to bankruptcy that is available for people with overpowering debts that require a simpler and less ruthless solution. Government legislation, the Insolvency Act 1986, established the principle of IVA’s to allow the debtor to make a application to their creditors, in order to reach an amicable settlement. Approval is generally required by 75% of the creditors, who will in turn receive more money than they would through the option of bankruptcy. The IVA on approval then stands as a contract that will prevent any further action from being taken. This means that creditors are also required to freeze any interest that would usually be incurred once the IVA is approved.

The standard time that an IVA will stand for is five years, but this can be subject to each individual case and the situation at hand. Debtors will pay whatever they can afford on a monthly basis for this time period. After the time period is up, their debt is considered to be cleared.

Although a very attractive alternative to bankruptcy, caution must be taken as there are still some elements that are akin with bankruptcy. The ability to obtain credit will usually be extremely difficult after seeking an IVA, as it would be with bankruptcy, and obtaining a mortgage will often mean interest will be higher as it is seen as dealing with a person of high risk. A person will have to fulfil certain criteria before applying for an IVA. Many internet companies offer a solution, but it is important that all information is read thoroughly in order to take the correct steps in seeking this solution.