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An IVA, or individual voluntary arrangement, is a formal agreement between you and your creditors.  The agreement involves you paying a specific reduced amount on the total owed.  Usually after a five year period the debts are listed as settled.  An IVA must be set up by a licensed professional called an Insolvency Practitioner or IP.

Depending on the individual’s specific situation a substantial amount of the total debt can be legally written off.  This can make it possible for the creditor to get funds on the debt owed.  It also allows the individual to work toward a solution for their financial hardship.

One key factor in an IVA is that the interest and other debt charges are no longer applied by creditors to the debt.  Instead the accounts are frozen.  Also instead of paying multiple amounts to the different creditors, one payment is made a month and the funds are then distributed.

Debt Consolidation | iva.net

Once an IVA is agreed upon the creditors cannot demand changes or additional payments to the debt owed.  The IVA is legally fixed until the agreed upon debt amount is paid.

An IVA is an alternative to bankruptcy for many that find themselves in financial hardships.  Not all will be able to qualify for an IVA, but it should be reviewed to find out whether it is possible.  When securing an IVA do not confuse it with a debt management plan (DMP).  IVA is a formal agreement, whereas the DMP is not a formal agreement.