An IVA or Insolvency Voluntary Arrangement is a legal process which allows you to reschedule your debt repayments over a fixed period and effectively write-off up to 75% of your debts. If you stick to the arrangement and meet the rescheduled payments, after your agreed IVA repayment period is completed you are free and clear to resume you life without any financial supervision.

A common question is how much is all this going to cost?

The straight answer is it ought to cost you nothing – the fees and costs involved are included in the renegotiated monthly payment which is agreed with your creditors and deducted from that payment as you make them over the life of the IVA.

The Advantages of an IVA

IVA's have a number of distinct advantages over other forms of debt write-off mechanisms, notably bankruptcy.

In brief they are:

•You get to keep your home – an IVA does not require you to sell your home and use the equity in it to repay your creditors;

•IVA's are a private arrangement – so you don't need to disclose the arrangement to your employer – only you, your creditors, the Insolvency Practitioner and the court need to be told of the arrangement;

•No more harassment – once you apply for an IVA all the visits and telephone calls by bailiffs and debt collection agencies will cease and the red ink letters will n o longer be dropping through your letterbox;

•All interest and charges are frozen – in fact, once the IVA is in place all you have to pay is what the renegotiated monthly payments are. There will be no more interest applied and no more charges; and

•Taking charge of your finances – you are actually facing up to the financial situation and coming up with the best arrangement to settle your debts that is possible and in many instances, creditors are actually getting more money than they would if they bankrupted you.

Now this all seems like good stuff so let's take a look at the other side of IVA's.

The Disadvantages of IVA's

The disadvantages of an IVA are:

•5 year IVA period – you are in the IVA for 5 years and must maintain the repayments for that time whereas if you declare bankruptcy, you are only supervised for 12 months;

•While you will not lose your home, you may have to release the equity in it to satisfy your creditors;

•Repayments are reviewed – while you may agree an initial repayment level, they are subject to review to ensure you are repaying as much as is affordable;

•Credit ratings – a record of your IVA is kept on your credit file for 6 years which means that obtaining credit may be a problem and credit may be more expensive; and

•Bankruptcy – if you fail to stick with your repayments, your creditors may still declare you as bankrupt – while you may be able to reschedule repayments in the event of losing your job or even obtain a payment holiday, failing to stick to the terms of the IVA can result in you being declared bankrupt.