Individual Voluntary Arrangement (IVA), or Trust Deed (in Scotland)

An IVA is one of the more extreme forms of Debt Management. If you can't maintain the originally agreed IVA payments, in full, you are only one step from bankruptcy. If you feel flexibility is important to you Debt Management may be the better option.

An Individual Voluntary Arrangement (IVA) is a legally binding agreement, arranged with the help of an Insolvency Practitioner and the law courts, between you and your (lenders) creditors to pay a reduced payment each month. The payments must be paid - without fail - for a period of five to six years. After this time, the debt is considered to be settled.

Like a debt management plan the IVA practitioner will work out how much you can afford to pay each month out of your surplus income. A proposal is drawn up which sets out how you are going to repay your creditors.
You must obtain a vote in favour of your proposal from creditors representing at least 75% of your debt. If you do not get this agreement, the IVA will be rejected by the Courts.

An IVA does not have the same stigma or publicity that accompanies bankruptcy. You can operate a normal bank current account, providing you do not have an overdraft facility.

If you are unable to make the repayments in full for any period during the five to six years of an IVA, this is serious and you can be forced into Bankruptcy by your creditors. This will waste years of your time and money.

Assets such as your home, any savings and investments are less at risk than with declaring bankruptcy – however they are still at risk.

IVA’s do affect your credit worthiness. You will have to manage without credit for a while. They will be kept on record for up to at least 6 years.

The cost of obtaining an IVA can be upwards of £2,500 plus VAT and expenses.