An IVA is a legally binding contract between you and your creditors. It allows a person to make a formal proposal to settle a debt within a reasonable and fixed period of time. A licensed Insolvency Practitioner makes a proposal to your creditors and negotiates on your behalf. You just have to disclose all of your financials to them and they work out the terms for you. You make payments to the Insolvency Practitioner, which are based on what you can afford. The repayment period is 60 months and once you make your final payment, your outstanding debts are written off.

The key is to get advice that is specific to your financial circumstances. For example, if you don’t own any assets and are unemployed, then bankruptcy could be an option. If you are a professional, it might cost you your job though. A specialist debt advisor will be able to offer you assistance in making the right call. Take the free, 15 second debt wizard on the Harrington Brooks website and get impartial advice on the best course of debt help.

There are a number of points of distinction that are important to the individual involved when trying to decide between bankruptcy or an Individual Voluntary Arrangement. There are a number of points which make an IVA preferable to a declaration of bankruptcy. The primary attraction of an IVA over bankruptcy is the risk to your assets. The chances are, if you own your property, insolvency proceedings will put your home in serious danger of repossession. An IVA allows you to keep your house but it may require you to give up some of the equity you have in it to service your debt.

Further to this, the bankruptcy procedure is a public matter and there is a legal obligation to publicise the results of any insolvency in the local press. Also, you have an obligation to ensure that banks and other interested parties are made aware of it too. IVA’s are more private, only being published on the Insolvency Service’s website.

Naturally, setting up an IVA hinges on you having the ability to service some proportion of your debt. In order for three quarters of your creditors, the minimum proportion required to attain an IVA, to accept the terms of the agreement, you will have to demonstrate your ability to meet the repayment schedule. This creditor percentage is determined by value of debt rather than head-count. This means that if one creditor is owed 30% of your total debt, they have the power to veto the arrangement. Creditors can put forward changes to the proposal but there is no obligation to accept these. Interest rates will be frozen and your creditors will be forbidden from making additional charges.