When you have debt problems, there are a few ways out and the one you choose will be decided mainly by the amount you owe, as well as your income and the assets you have in your possession.

As well as debt relief orders (DROs) and debt management plans (DMPs) there’s are also the individual voluntary arrangement (IVA). An IVA is a contract – a legal agreement – between creditors and debtors that allows the debtor to make achievable regular repayments to settle the debt.

How it all works

An IVA is devised and managed by a qualified insolvency practitioner (IP) The IP works out an affordable repayment plan and then acts as the go-between for the borrower and their creditors to make sure both parties are happy. It’s a balancing act between the creditors, who want the amount repaid ASAP and the borrower, who wants a realistic payment each month.

An IVA can only go through if 75% of the creditors approve of the IP’s proposed arrangement, but in most cases, they do agree. Once the IVA has been approved, monthly payments go to the IP, who then divides the money up between each creditor.

Can everyone qualify for an IVA?

Not everyone can apply for an IVA. They’re available in England, Wales and Northern Ireland but not in Scotland and there are other criteria too. The person must have at least three creditors and have debts totaling more than £15,000.

Is an IVA a good idea?

An IVA is a good idea for some borrowers, especially if they have several creditors and simply can’t cope with the repayments. The agreement is legally binding, which means that creditors have to abide by it and not take any further legal action against the borrower as long as the repayments are being made.