Those concerned with debt are well advised to take the time to learn as much as possible about the options available to them. In this section you will be able to find descrptions written by subject experts of the various solutions. As well as describing how they work you will be able to learn about the strengths and possible drawbacks of each option. Which should you choose? That depends on your circumstances and priorities. We trust that this section of Debt Divas will give you the information that you need to make an informed choice.

“IVA” stands for an Individual Voluntary Arrangement which is a contractual agreement between and individual and his/her creditors, usually to accept a reduced level of repayment over a set timescale. In order to propose an IVA, an individual must be insolvent – ie unable to repay their debts when the debt repayments fall due. IVAs are generally used as an alternative to bankruptcy – in order to protect assets, to offer a higher return to creditors and to avoid the unnecessary publicity associated with bankruptcy.

To be eligible for an IVA you will need to have at least three unsecured creditors, and aggregate debts of at least £15,000, generally with a disposable income of more than £250. These figures are guidelines, but most insolvency practitioners will work within these boundaries in order to make the solution effective for both client and creditors. If you have assets, such as equity in your property, savings or investments or other items of material value, these may also need to be included into the arrangement – but an insolvency practitioner will advise on these areas on an individual basis. Often IVAs are proposed on the basis of lump sums being offered in full and final settlement. These monies can be derived from the realisation of assets – such as the sale of a property – or the introduction of monies from a third party.

The terms of your proposal to creditors may be very flexible, but creditors will expect their prospects of recovery to be at least as good as in a bankruptcy and you will likely have to make some lifestyle changes as you adapt to a more structured household budget. You will need to engage the services of a Licensed Insolvency Practitioner (“IP”) to act for you, who is initially known as your “Nominee”, and if the creditors accept your proposal the IP then becomes the “Supervisor” of the arrangement.

Your IP will assist you to formulate your proposals to creditors, which will be circulated prior to a convened meeting of creditors where a vote will be taken as to whether to accept, modify or reject the proposed IVA. In order to be accepted, a majority vote of 75% of those creditors present will need to be achieved. Creditors may put forward changes to the proposal, but they cannot impose them on you as you decide whether to accept them or not. You will not need to attend your creditors meeting in person, but your IP will expect you to be available during that day by the telephone in order that they can act upon your instructions.

Once the Supervisor is in office, his/her job is to ensure that you fulfil your responsibilities under the IVA and that creditors get repaid at the earliest opportunity. The costs of the IVA are borne from the monies you are intending to introduce into the arrangement, and a reputable IP will not ask you to pay anything in advance. Regular reviews of your ongoing financial situation will be carried out at least once per year, and the Supervisor will report their progress to you at this time. Providing that you comply in full with the terms of your agreement, you will eventually be released from the remaining creditor balances and be served with a Certificate of Completion by way of evidence.

Having an IVA accepted gives you the opportunity to avoid bankruptcy whilst repaying your creditors to the best of your ability over a realistic timescale. They give certainty to a previously uncertain future, and assist with financial rehabilitation leading to an eventual repaired credit rating.

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