If you are in financial trouble and you do not wish to go bankrupt then an individual voluntary arrangement may be a good alternative for you. It can be quite complicated but is a route to avoiding bankruptcy and the disadvantages that go with it. In the past it was normally only used by struggling businesses but now more individuals are taken up the option as well. Unfortunately, in this current economic climate, many more people are struggling financially and this may be an option that they will need to consider.

The individual voluntary arrangement, which is often referred to as IVA was set up in 1986 and is a formal repayment proposal. It is presented to the individuals creditors through an insolvency practitioner. It tends to be a flexible plan which allows the individual to pay back their debts at a rate that they can afford. It is calculated taking in to account the income of that individual, the assets they hold and any other money that they have coming in. There income and outgoings are calculated and then any money left over is used to pay off their creditors.  

It may be better to consider a debt management plan to organise your finances but if your problems are very serious then it may be better to use the services of the insolvency practitioner to help you to manage your situation.

Failing that & dependent upon age, there is a final repayment possibility of using a lifetime mortgage to clear the debt. The minimum age for these schemes is 55 & with the use of an equity release calculator you can ascertain how much can be raised against your property value. Hopefully, the amount released can clear the debt mountain with no future monthly payments to affect budget.

It is up to the creditors as to whether they can agree on you taking an IVA. They will consider the options. They are likely to get more money this way than they would if you are declared bankrupt and so they are likely to take a favourable view. They will vote as to whether they are happy with this arrangement.  

The reason that many people choose this option over bankruptcy is that they can protect their assets. In bankruptcy everything must be sold, whereas an agreement like this will protect the assets such as the individuals house. Many people think that an IVA does not effect the credit rating in the same way as bankruptcy, but in fact it makes little difference as it is still recorded by credit agencies and listed publicly on the Personal Insolvency Register.

An IVA can last up to 5 years whereas bankruptcy only last one year and payments tend to be lower. An IVA will not stop a debtor being able to obtain further credit in the same way that bankruptcy will. It will also not stop the business from trading or having to declare their situation in the same way that bankruptcy does.

There are fees to be paid as part of an IVA but these will not have a big effect on what is paid back as it tends to be taken out of what is owed to the creditor. Another advantage of IVA over bankruptcy is that in most cases the individual will not lose their home or be forced to sell.

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