Back To Basics - Exactly What Is An Iva?

An Individual Voluntary Agreement, or an IVA for short, is a legal agreement that, for people owing 15,000 or more, can write off up to 75% of the debt. Seen as an alternative to bankruptcy, an Individual Voluntary Agreement lets the person in debt, the debtor, pay off the remaining debt in amounts that still allow them to keep up with their mortgage, food, bills etc.

An IVA is a legal process which takes place between the person in debt and a Licensed Insolvency Practitioner. Apart from the benefit of having up to 75% of the debt wiped off, an IVA sets up an agreement between the Licensed Insolvency Practitioner and the creditors to whom the money is owed. This means goodbye to creditor's demanding money and contacting the person in debt directly.

For the creditor who is owed money, an IVA is often the best solution because chasing money is a costly process. At least with an IVA they're aware they could get more money back than if the debtor declares bankruptcy. Because an IVA is approved by the Licensed Insolvency Practitioner as well as the creditor, the creditor has already decided that an IVA is the best way in which they are going to receive some of their money back.

An IVA is a flexible agreement based on the individual debtor's circumstances and finances. From start to finish, setting up an IVA can take between 6-8 weeks, with the debt amount set to be repaid between 3-5 years. IVAs are often popular with debtors who wish to try and protect their assets, which may be at a higher risk if they opted for bankruptcy instead.

As with all financial repayment schemes there are advantages and disadvantages of IVAs to those facing debt. With Licensed Insolvency Practitioners who specialise in IVAs available, it is worth considering or learning more about IVAs before deciding to declare bankruptcy.