An Individual Voluntary Arrangement (IVA) is a procedure introduced by the Government in 1986 as an alternative to Bankruptcy. It helps people across the UK move towards a debt-free future.
An IVA typically lasts five years and clients pay what is affordable on a monthly basis. After this any remaining debt is paid off.
If you are struggling with personal debts, bankruptcy might be a viable option to help you back on the path to a debt-free future. Although the term ‘bankruptcy’ carries an element of stigma, for many people it is the best way forward for their given circumstances and more appropriate than an IVA or debt management plan.
So what is bankruptcy? It is a court-based procedure and you can either choose to become bankrupt or it can be enforced against you if you cannot pay your debts. Your assets will be placed in the hands of an officially appointed Trustee (who has extensive powers of investigation) who will take steps to turn your assets into money, which can then be used to pay off creditors.
After the Trust Deed is signed, the Trustee will write to all your creditors. Unless creditors who are owed more than one third of the total debt, object (which is very rare) the Trust Deed can be protected, which will prevent them from taking any further action against you.
Any correspondence from your creditors should be passed to your Trustee to deal with. You will need to continue to pay your mortgage and any other ongoing living expenses.
You can continue to work in order to earn a living for you and your family. If your earnings are sufficient, you may have to pay a proportion of your income to your Trustee.
Until the Trust Deed is finished, you need to let your Trustee know if you move house, or your financial circumstances change.