In Britain, individuals who wish to avoid bankruptcy may think about getting an IVA (Individual Voluntary Arrangement). Ostensibly, IVAs come across as a very complicated and confusing idea, which can augment the stress already come about by the panic of increasing debt concerns. However, with just a little bit of an explanation on the IVA basics, a person should be able to understand whether establishing an IVA agreement with his or her creditors could be a wise move or whether they would be better opting for an alternative debt relief option instead.

Here’s a short IVA FAQ:

What is an IVA? IVAs are agreements that are legally binding, taking place between the people owing money and the businesses or people owed money – the debtors and creditors, respectively. The IVA complies to set terms that both parties agree to, so that the debtor can repay the debts over a set period of time and at a set monthly rate.

How does an IVA benefit debtors and creditors? The advantages for debtors are obvious: they avoid bankruptcy whilst working towards being debt-free in the future; creditors will back down, refrain from getting in touch, and the threat of legal action is removed. Meanwhile, the big advantage for creditors – although not as obvious – is that they’ll get some of their money repaid, certainly more than if the debtor declares bankruptcy.

Who are IVAs best suited to? IVAs may be preferred by a debtor that owes a substantial sum of money, usually more than £15k. They typically only qualify if the debt’s owed to 2 or more creditors too. On top of this, it should be noted that as well as the fact that IVAs are only applicable to the United Kingdom, they’re really only applicable to individuals in England, Wales and Northern Ireland. Meanwhile, Scotland has its own version of an IVA, called a Protected Trust Deed. Therefore, if an individual resides in Scotland, owes less than £15,000 or only has one creditor, other debt settlement options may be more suitable.

How does the IVA process work? In a nutshell, when a person in debt speaks with an IVA professional with regards to IVA help, they’ll have their particular situation assessed and reviewed by said professional – how much they owe, the amount that can be repaid, and so on – and will be able to advise if an IVA is in fact the best thing to do based on their specific circumstances. If it is then the creditors will be contacted and notified on the IVA proposal and if they are satisfied with the terms then the IVA can be put into place, letting the debtor to commence aiming to a debt-free life.

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