IVA stands for Individual Voluntary Arrangement. It is a legally binding contract between the debtor and the creditor. They were introduced in 1986 as part of government legislation, which offers those who are struggling with large amount of debt with a bankruptcy alternative.

With an IVA, you are legally protected from any further action from your creditors. You commit to making set monthly payments for an average of 60 months, at the end of this period you will be free from any unpaid debt.

You only make monthly payments which are affordable to you after your living expenses have been deducted. This should relieve any pressure that you may have in paying your priority debts.

An IVA is best suited to those who have a stable income, multiple creditors and over £12,000 worth of debt. If you fit the IVA criteria, bar the debt level, then you may be suited to a debt management plan. Like an IVA it allows you to make reduced payments to your creditors and interest and charges on the debt may be frozen. Although it  is an informal agreement and does not offer the benefit to have any amount of your debt written off.

If you do have high levels of debt and are facing the possibility of going through the bankruptcy process, an IVA could be a more suitable alternative. If you own your own home then there is a strong chance that you could lose it during bankruptcy, but with an IVA you can exclude your home from the proposal. There are additional long-term implications which are avoided with an IVA.