Individual Voluntary Arrangement,

An Individual Voluntary Arrangement (IVA) helps those in financial difficulties to make a formal proposal to the creditors to settle their debt within a set period of time (normally 60 months), this option is more preferable with your creditors rather than bankruptcy.

You will make one affordable monthly payment based on your disposable income. Once the final payment is made, any outstanding debt is legally written off. The arrangement can write off up to 75% of your debts (subject to your circumstances).

Once a decision has been made that an Individual Voluntary Arrangement (IVA) is the best debt solution for you, you will be asked questions regarding your current financial situation. Based on the information you have given, a repayment amount will be agreed with you. Once your IVA proposals have been drawn up you will need to check, sign and return these to your Insolvency Practitioner (IP). An application may then be made to the court for an Interim Order. Once this is in place, no creditors will be able to take legal action against you.

You may be asked to attend your creditors meeting but this rarely happens, normally you are asked to be contactable by phone on the day of the meeting. For an Individual Voluntary Arrangement (IVA) to be approved, creditors will be called upon to vote either for or against the arrangement. If only one creditor votes "for" the Individual Voluntary Arrangement (IVA), the Individual Voluntary Arrangement (IVA) will be approved. However, if only one creditor votes against the Individual Voluntary Arrangement (IVA) and they represent less than 25% of your total debt, the meeting will be suspended for a later date and other creditors who did not vote will be called upon for their vote.

If the creditor who voted against the Individual Voluntary Arrangement (IVA) represents more than 25% of the total debt you owe the Individual Voluntary Arrangement (IVA) will fail. This is because an Individual Voluntary Arrangement (IVA) will only ever be approved if 75% in monetary value is voted for. If any of the creditors don't vote, it is assumed that they will vote FOR the Individual Voluntary Arrangement (IVA).

The Individual Voluntary Arrangement (IVA) will be legally binding. As long as you keep up the monthly repayments to the IVA, when the term of your agreement is finished, you will be debt free and any of the debts not paid on the IVA will be written off. The insolvency practitioner (IP) will manage the day to day running of your IVA and they will undertake periodic reviews to ensure the Individual Voluntary Arrangement runs smoothly.

It is very important that consumers do not confuse an Individual Voluntary Arrangement (IVA) with a Debt Management Plan, which are not legally binding.

Most IVA cases are based around one affordable monthly payment, paid over a set period of time (normally 60 months). This one affordable payment is based on your disposable income.

An Individual Voluntary Arrangement - IVA proposal has to be prepared by a licensed Insolvency Practitioner (IP) who then presents it to creditors at a creditors meeting. When an Individual Voluntary Arrangement (IVA) is accepted the Insolvency Practitioners (IPs) role becomes that of supervisor, monitoring the Individual Voluntary Arrangement (IVA's) progress and ensuring that the terms and conditions that were agreed to at the creditors meeting are properly adhered to.

It is the debtor's responsibility to pay their monthly payment to the Insolvency Practitioner (IP) who will then ensure that these payments are distributed to all creditors on a pro-rata basis in accordance with terms and until the successful completion of the Individual Voluntary Arrangement (IVA).

It is in the debtors own interest to maintain their monthly payments as failure to pay will almost certainly result in the failure of the Individual Voluntary Arrangement (IVA). Upon the successful completion of the Individual Voluntary Arrangement (IVA) the debtor will be considered debt free even though they may not have actually paid off all of their debts in full. Any outstanding balances are written off (known as a composition of debts) and the debtor is then free to make a fresh financial start.

It is worth noting that if you do enter into an Individual Voluntary Arrangement (IVA) with your creditors and you have an endowment policy linked to your mortgage then you may be expected to cash it in and pay the proceeds into the arrangement. Likewise, if your property has a reasonable amount of equity then it is likely that a some of it will have to be released at sometime during the arrangement (usually in the 4th year), so it can be paid to creditors.