Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangements are essentially an alternative to bankruptcy, whereby a debtor in financial difficulty comes to an arrangement with his or her creditors on how the debt will be cleared. The debtor agrees to make regular payments to an insolvency practitioner, who will divide this money between the creditors.

Established by the Insolvency Act of 1986, it is a legally binding arrangement conducted via a licensed insolvency practitioner and monitored by the courts. The arrangement is usually conducted over a five-year period where the debtor pays as much as they can afford, after which time they will be released from their debts.

However, while an IVA gives some protection against creditors, if the debtor owns a home they may still be required to release equity from it. Bankruptcy proceedings can also still be brought against them if they fail to make the agreed payments. Limited companies can seek Company Voluntary Arrangements, which are similar agreements with a company's creditors.