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An Individual Voluntary Arrangement is a formal debt solution, which offers people suffering with serious credit card debts a chance to avoid bankruptcy.

It allows a person a chance to formally approach their creditors with a fixed term financial plan, normally 5 years long, which will provide a higher financial return to their creditors than the return that would be generated should the creditors decide to make the person bankrupt.

An IVA offers many benefits to the applicant as well as to the creditors and one of the many benefits of an IVA is that it protects the assets of the applicant that bankruptcy would otherwise make vulnerable to creditors.

For example, if the applicant had equity in his home, bankruptcy would nearly always require for the equity to be released, for the good of the bankrupt’s creditors. If the equity couldn’t be released through refinancing or through 3rd party funds being introduced to an equivalent value, the Official Receiver would require the home to be forcibly sold in order to release the equity to the creditors.

However, in an IVA, the equity in that same property would be protected as part of the arrangement.

Terms and conditions written into the IVA proposal would specify the guidelines by which the arrangement was to deal with the equity in the home.

Creditors would be invited to agree to these terms and conditions before the IVA began, at a meeting of creditors. If more than 75%, (in debt terms) agreed to accept the IVA, the IVA would become legally binding on all creditors named in it, whether they voted to accept or not.

Standard IVA terms offer no more than a maximum 85% of the property’s equity to ever be released under the arrangement. And this can only be insisted upon if a lender can be found who is prepared to provide the funds at an affordable rate for the applicant.

If these IVA terms cannot be met, the IVA would instead be extended by a further 12 months in lieu of the equity that was there, but couldn’t be released.

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