An Individual Voluntary Arrangement, known as an IVA, is an agreement made between a debtor and his or her creditors to repay a percentage of the debts owed over the ‘life' of the IVA which is generally five years or sixty months. To ensure that monies are distributed evenly and fairly to the creditors the IVA is managed by an Insolvency Practitioner. The Practitioner ensures that the debtor is given the fairest and most honest, realistic opportunity to make regular monthly payments into their IVA fund. The fund is managed and supervised throughout the duration of the IVA by the Insolvency Practitioner.

An IVA can only be initiated by the debtor unless he or she is an undercharged bankrupt, if this is the case the trustee, Official Reviewer or the bankruptcy courts can initiate an IVA. When a debtor is facing bankruptcy the courts are obliged to consider whether an IVA might be a more appropriate solution than bankruptcy.

IVAs should not be seen as a way of simply paying debts off over five years and forgetting about it, there are some careful considerations to be made by the debtor in respective of the what is exactly required by them and the genuine commitment involved with an Individual Voluntary Arrangement. An IVA is a formal and legally binding arrangement.

There will be an marked effect on the debtor's current assets, savings and investments, although an IVA has less risk on these than bankruptcy there is never the less a risk. Debtors will be expected and indeed will have to agree to sell luxury items and re-mortgage their home as well as surrendering their savings and investments.

Problems which can lead to people falling into debt include problems such as having insufficient money to pay their mortgage, holiday debts, credit and store card debts, resulting in very little, if any, spare cash to live a reasonable lifestyle. By using an Insolvency Practitioner a debt can realistically look at amalgamating their debits into one monthly payment which is supervised by the Insolvency Practitioner. This will in turn lead them to having more spare cash and relieves the stress and pressure of numerous debts.

The Insolvency Practitioner can help by giving expert advise on all aspects of an IVA, reduce debts by having them put into one far more manageable monthly payment, stop creditors from harassing the debtor, freezing the interest on all debts, which in turn will lead to the debtor to have more spare cash and a better quality of life without the worries and health problems being in debt can cause.

It should be noted however, that although an IVA is an excellent opportunity for debtors to relieve themselves of the worries of facing bankruptcy and the stressful situations caused by debt, it should not be seen as a ‘cop out' and taken lightly. The agreed payments must be made to the Insolvency Practitioner every month and in as much as for most people the relief of not having to face creditors themselves is a tremendous weight lifted from their shoulders, they should not under estimate the commitment which is required with an IVA.