An IVA is typically used by individuals who have a significant amount of unsecured debt, such as credit card debt, personal loans, and unpaid bills. To qualify for an IVA, an individual must have at least £5,000 in unsecured debt and have a regular income that can be used to make payments towards the IVA.

To set up an IVA begins with the individual seeking the advice of a licensed Insolvency Practitioner. The insolvency practitioner will assess the individual’s financial situation and, if an IVA is deemed to be appropriate, will work with the individual to create a proposal for the IVA.

This proposal will detail the individual’s income, expenses, and assets, and will include a repayment plan for the individual’s creditors.

Once the proposal has been created, it will be sent to the individual’s creditors for approval. If more than 75% of the creditors vote in favour of the IVA, it will be approved and legally binding on all of the individual’s creditors.

During the term of the IVA, the individual will make regular payments to the insolvency practitioner, who will then distribute the funds to the individual’s creditors.

The individual will also be required to disclose any changes in their financial situation to the insolvency practitioner, such as a change in income or the acquisition of assets.

At the end of the IVA, any remaining debt that is covered by the IVA will be written off. This means that the individual will no longer be legally responsible for repaying that debt.

An IVA has several advantages over bankruptcy. For example, an IVA allows an individual to keep their assets, such as their home and car, whereas in bankruptcy, these assets may be sold to repay creditors.

An IVA also allows an individual to continue to trade, whereas in bankruptcy, an individual’s business may be closed. Additionally, an IVA can be completed in a shorter period than bankruptcy, typically five years compared to up to 15 years for bankruptcy.

However, an IVA also has several drawbacks. For example, it will be recorded on the individual’s credit file for six years, which can make it difficult to obtain credit during that time.

The individual will be required to disclose the IVA on any credit application or job application that asks about previous bankruptcies or debt arrangements.