Are you struggling with the unmanageable debt mountain? Extra interest is eating up all your monthly income and the debt never reducing? Are you thinking to take a new debt just to settle other debt? If you have over £20,000 of unsecured (non-mortgage) debts owed to at least three lenders and can afford to pay at least £300 per month towards them, you can propose an Individual Voluntary Arrangement to settle them and clear your irritating debts permanently. Unlike debt management or debt consolidation plans, once the agreement is approved interest stops and you will be free of debt after 5 years, even if creditors have only gotten back 25% of their lent amount.

It is fact that this agreement is costlier than bankruptcy. Under this agreement, the going rate is for 5 years rather then the 3 years were you to be subject to an Income Payment Order under the bankruptcy suit. The level of monthly contribution by may also be higher compared to bankruptcy. You don't put forward this agreement to save money, you do it because you need or want to avoid bankruptcy. For this you have to be informed regarding how this agreement works.

At the outset of Individual Voluntary Arrangement, the Insolvency Practitioner interviews you to ascertain your assets and liabilities, what you can afford to put into the agreement and how you came to get into your current adverse financial situation. The Insolvency Practitioner depending on whether lenders are taking any legal action against you, obtain a Court order suspending such repossession action while the proposal is being considered. When he has all the necessary information he prepares the proposal regarding your intended repayment contract with your creditors, and agrees this document with you before sending it for further proceeding.

The Insolvency Practitioner reports to the Court that in his opinion a meeting of lenders should be held. The Court will then order that the meeting be held within a few weeks. The lenders are sent a copy of the proposal a few weeks before the meeting and they will then consider whether to vote in favour of it or against. At the lender-borrower meeting of the IVA, if lenders attend, modifications to the proposal could be put forward and considered. Otherwise the votes in favour and the votes against are counted to see whether the required majority (75%) for approval has been obtained.

If insufficient votes in favour of the IVA have been received, the meeting can be adjourned for next 2 weeks while the Insolvency Practitioner negotiates further with lenders to attempt to secure support. When the final decision has been reached the practitioner reports to the Court, the debtor and the creditors then meet. If the arrangement is approved, then the debtor and all creditors are bound by legal terms and it commences without any debt loans. While the IVA is in force, the borrower must make the agreed monthly payments to the practitioner who once a year will report to everyone and pay a dividend to the lenders. When the IVA concludes successfully, the Supervisor sends out his final report and dividend.