An Individual Voluntary Arrangement might be the right solution for your debt, depending on your circumstances. Sometimes, and IVA is the only thing that can save you from bankruptcy. While the IVA may have its advantages, the disadvantages can be very restrictive, so explore your options carefully.

You must owe at least £15,000 in unsecured debt to qualify for an IVA. Additionally, you must have a regular income that allows you to make monthly payments toward your debt, after all your other monthly bills have been paid. If you can’t afford a monthly payment, you may have to enter into bankruptcy. An IVA will become a legal agreement between you and your creditors, set up by an insolvency practitioner, giving you up to five years to repay your debt.

An insolvency practitioner will set up a meeting with your creditors and devise a plan for the repayment of your debt. Often, an insolvency practitioner can convince your creditors to accept a plan that erases up to three quarters of your debt. For the agreement to become binding, more than 75% of your creditors must agree to the plan. The first proposal is usually declined, and the practitioner will have to find a solution that the creditors will accept. Upon approval, you will then make a monthly payment to be divided amongst the creditors, with a portion going to pay the insolvency practitioner’s fee.

The advantages of an IVA can be numerous. During an IVA, you are not in danger of losing your home, your amount of debt can be significantly reduced, interest charges are stopped, and the fees associated with an IVA are usually much less than those incurred by bankruptcy. The monthly payments you make will be based on your income, and change with your income as well. IVA’s also have less stigma than a bankruptcy, though both stay on a credit file for six years. With an IVA, the debtor is not prohibited from obtaining credit during the process.

One of the disadvantages of an IVA is the expense; while it’s less expensive than bankruptcy, the insolvency practitioner fees will be costly, and other forms of debt solution might be cheaper. Another problem that many people find difficult is that throughout the IVA, your finances are closely monitored. You will have to explain any unusual activity and any extra monies you receive during the period will have to go toward the IVA, including work bonuses and inheritances. If you should fail to meet the requirements of the agreement, you may be forced into bankruptcy.

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