An IVA, or an individual voluntary arrangement, is an alternative for consumers who are facing financial difficulty.
While this can be used in addition to a bankruptcy, most individuals will use it as a means to avoid bankruptcy from actually occurring.
This measure was established in 1986 as a part of the Insolvency Act.
When faced with financial difficulty, consumers can seek an IVA with their unsecured credit creditors. In its simplest form, it is a contract that enables a person in debt to rework their payment structures to enable them to be able to meet their financial commitment to these creditors.
If successful, it can help prevent a bankruptcy and a black mark on the credit report.
From the creditors standpoint, agreeing to terms of an IVA is often much better than allowing the situation to proceed into bankruptcy.
In this case, they will still receive a portion of the debt owed rather than having the entire debt be discharged in bankruptcy. Faced with the choice of receiving no income or a percentage, it is an easy choice to make.
People seeking the help of a debt counselor or debt management service will more than likely have this presented to them as a means with which to get their debt problem under control.
If someone is using a service such as this, the service will handle the negotiations, but the person in debt would still have the final say as to whether or not to approve the arrangements.
If debt is building up, regardless of how dire the situation appears, there are alternatives to bankruptcy. Using an IVA allows someone to honor their debt, although it will probably be at a considerable discount, and not have the black mark of a bankruptcy on the credit report.
It will also enable the protection of assets that might otherwise be forfeited in bankruptcy proceedings.
