What is an IVA?

Another debt solution available to those in financial trouble in the UK is the IVA. IVA is short for individual voluntary arrangement and has similar elements to a debt management plan. The biggest differences however are that, firstly, the IVA is often only available to those whose debt exceed £15000 and secondly this is government endorsed and thus a legal debt solution. That means it lacks the informality of the debt management plan. While this means you could not simply cancel an IVA as you would with a DMP, it also means that neither can your creditors.

In much the same way as a Debt Management Plan works, you pay one set fee for a set period of time. It is a legal requirement, with an IVA, to use a licensed IVA provider. This provider assesses your budget and works out what you can afford to pay each month. He or she will then approach your lenders and if 75% of your creditors agree to the offer made, the other 25% have no choice but to accept. An IVA lasts 3 - 5 years and at the end of it, your debts are considered settled in full.

This does show on your credit record and is likely to adversely affect your chances of getting credit. However, this is a much better debt solution than bankruptcy and is a real alternative bankruptcy for those in the UK who are struggling with high amounts of debt.