In Britain, people who want to avoid bankruptcy may consider applying for an IVA (Individual Voluntary Arrangement). At first blush, IVAs come across as a rather complicated idea, which can add to the stress already created by the worry of increasing debt concerns. However, with just a little bit of an explanation on the basics of an IVA, an individual should be able to understand whether starting an IVA agreement with his/her creditors would be a wise move or whether they would be better opting for a different debt solution instead.

What is an IVA? IVAs are agreements that are legally binding, existing between the people who owe money and the businesses or people who are owed money - the debtors and creditors, respectively. The IVA complies to a set of terms that both parties agree to, so that the debtor can repay their debts over an agreed duration of time and at an agreed monthly cost.

What are the benefits of IVAs to both debtors and creditors? The major benefit for a creditor is that they will get some of their money back - it mightn't be everything, but it will certainly be more than if the debtor declares bankruptcy instead. For a debtor, there's a number of benefits: they can avoid bankruptcy; they can work for a future that's free of debt; creditors will refrain from chasing the debtor for money and can't threaten legal action.

Who should apply for IVAs? To begin with, IVAs are only available in the United Kingdom, however they are also only relevant to residents England, Wales and Northern Ireland - Scotland has its own alternative variation, known as a Trust Deed. IVAs are most suitable for those who are struggling to repay big amounts of debts. In order to qualify, debts must be owed to two or more creditors and should exceed ?15,000. Therefore, a person with less debt and perhaps only one creditor may want to consider other debt relief options.

How does the IVA process work? Briefly, when an individual in debt talks to an IVA service, they'll have their specific situation assessed and reviewed by said professional - how much they owe, the amount that can be repaid, and so on - and will be in a position to recommend if an IVA is indeed the best course of action based on their individual circumstances. If it is then the creditors will be contacted and notified on the IVA proposal and if they are satisfied with the set terms then the IVA can be started, allowing the debtor to start working to a debt-free life.