IVA is the acronym for Individual Voluntary Arrangement, which is a legally binding agreement between a person and the people or organizations to which that person owes money. The agreement can be set for a period up to five years, when the person pays what he can afford. An IVA can only be set by an Insolvency Practitioner.

How Does It Work?
If a person decides that he should apply for IVA and for the IVA to be approved, all the creditors will be called to vote in order to approve or decline the beginning of the IVA. In order for the IVA to be approved, the total votes in favour must be more than 75% of the monetary value of the debts.
During the period of the IVA, a person has to make the monthly repayments according to the terms of the agreement. In this time, the financial situation will be reviewed to see if it has changed.

The Advantages of IVA
All interests and charges will be set to 0% and no more additional charges will be demanded from the creditors.

Monthly payments will be set according to the amount of money the person can afford during the period of the agreement. After the final payment is made, all remaining debts will be written-off.

The IVA’s main purpose is for a person to avoid bankruptcy, as long as that person respects the monthly payments. During the time of the agreement, a person will not receive any more notifications or phone calls from creditors. The agreement is private, no one will know except for the creditors and the insolvency practitioner.

There are some disadvantages to IVA, like the fact that in case a person does not keep the monthly payments he or she may lose their home. A record of the IVA will also be on a person’s credit file for a period of six years, making borrowing money much more difficult.