Individual voluntary agreements, otherwise called IVAs, are a process in the United Kingdom that an individual may be eligible for if they are deeply in debt but want to avoid bankruptcy. An IVA is an agreement that is agreed upon between the creditors and the individual. The amount will vary greatly and is dependent upon the borrower's own situation. Creditors are not required to agree with the amount in an individual voluntary agreement but they usually choose to do so because IVSs provide a better return for creditors than bankruptcy would. There are many pros and cons attached to these agreements and it's important to understand them before committing to it.



One benefit is that a person's financial situation can remain confidential. Bankruptcy announcements are often broadcast in the newspaper but this is not so for IVAs. Although creditors may still consider you a risk because it does appear on your credit report, the agreement is solely between you and the creditor. Another positive aspect of IVAs is the amount of time they are effective. While bankruptcy runs out after one year, an IVA policy may cover as many as five years! The cost of a bankruptcy is also much more expensive than that of an IVA.

An IVA also holds many more benefits than other debt management systems when it refers to the protection that it provides. Once a creditor has agreed to a set amount, they cannot withdraw from the agreement. This cannot always be done in other debt management processes. Once a creditor has agreed to the IVA, they are bound to that agreement and cannot decide not to partake in it at any point. An individual voluntary agreement will show up on a credit report just as a file for bankruptcy would however, they do show a willingness to repay the debt whereas with bankruptcy, a borrower has claimed that they are not paying the debt back.

Individual voluntary agreements can also work better in business than bankruptcy. Should a partner in a company file for bankruptcy, they would generally need to dissolve the partnership of the company and they would also be required to tell any suppliers that they have filed for bankruptcy.

If a borrower should apply for credit and a creditor looks at their credit report, the IVA will show on the credit report, as mentioned above. However, this will not automatically dismiss the borrower as a good loan candidate. This would not be the case with bankruptcy as bankruptcy is considered to be the worst financial situation and no lenders will take on bankruptcy cases.

However, the main advantage to IVAs is that the borrower still has complete control over their home. This is not the case in bankruptcy and usually the home will be taken from the borrower and sold to cover the borrower's debts.

One of the only disadvantages to an individual voluntary agreement is that it does appear on your credit report. It will only appear for a short period of time but it will still be there. Although this is a negative, it's important to consider how important that really is. If you are deep in debt and considering an IVA the chances are that the credit report already has a few smudges on it and that even if it doesn't, if you don't do something to help yourself, such as an IVA, it won't take long for the smudges to get there!