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If you are struggling with unmanageable debts that you cannot see yourself repaying within a realistic period of time, an IVA (Individual Voluntary Arrangement) could help.

An IVA can allow you to avoid bankruptcy by agreeing to repay a set percentage of your debts over an agreed period of time, after which the remaining debt will be written off.

Why might an IVA be right for me?
In general, an IVA is useful for people with very large debts - usually £15,000 or more - who cannot see themselves being able to repay that debt in full within a reasonable time period.

Until IVAs became available, the only real option for people in this situation was bankruptcy. Bankruptcy can still be the most appropriate option for some people, but an IVA is widely considered to be a preferable alternative, since it avoids some of bankruptcy’s downsides (such as losing your home).

As with any debt solution, you should always consult your debt adviser to establish whether an IVA is right for your circumstances. It may be that an alternative debt solution, such as a debt management plan, would be more effective in helping you to reduce your debts.

How does an IVA work?
Before you begin an IVA, you will work with your Insolvency Practitioner (IP) to draw up your IVA proposal. This details the terms of your agreement - how much you are able to pay to each of your lenders, how long you will make payments for, etc.

Your creditors will then be invited to ‘vote’ on whether or not they approve the proposed terms. Creditors accounting for at least 75% of your total debt must approve the terms for the IVA to go ahead.

If it is approved, the IVA will begin and you will start making regular monthly payments to your Insolvency Practitioner. This will then be divided amongst your creditors, normally on a pro rata basis (according to what percentage of your total debt each creditor is owed).

Your IVA will normally last for five years. On successful completion, your remaining debt will be written off, and you will be legally debt free.

However, since the IVA will be recorded on your credit history for six years after the start, there will still be a record of your IVA for a further year, which will affect your ability to obtain credit.