IVAs (Individual Voluntary Arrangements | How To Write Off 70% Of Debts

There is an alternative to bankruptcy in the UK, it is called an Individual Voluntary Arrangement or IVA, (in Scotland a similar arrangement is called a Protected Trust Deed) This is a way of avoiding the stigma, and financial, as well as other legal repercussions of bankruptcy proceedings.

The IVA began life in 1986 under the Insolvency act, and is a way for debtors to engage in a formal agreement to repay creditors without the need for legal action. This arrangement usually only covers unsecured debt, such as credit cards, and is not usually related to secured debt, such as a mortgage, although it should be pointed out that this is not always the case.

An IVA is a formal contract that is based on the debtors available cash, the size if their income and third party payments, and is usually assessed on a combination of these factors. It basically assesses how much is owed, and how much can be repaid immediately, and/or over the long term to the creditors.

All the creditors decide if the proposal by the debtor is acceptable, 75% of the creditors have to accept the agreement, the advantage to most is that they will receive more of their cash back than if they went for bankruptcy.

Because of the advantages to both sides the IVA is becoming a more common method of dealing with debts that are unpaid, being seen as a good alternative to bankruptcy, which often has little benefit to either side.

It is also possible to enter into an IVA even after bankruptcy if the debts are undischarged. In this case it is usual for the Official Receiver to have the last word on the agreement. This agreement is not usually as beneficial to the debtor so is not used very often.