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An IVA is an alternative to bankruptcy brought in by the government as part of the Insolvency Act 1986. It makes it possible for an individual in debt (debtor) to make a proposal to the people they owe money to (creditors) to reach a settlement. Should the proposal be approved by a majority of the creditors, the IVA then stands as a  legally binding contract that binds all parties and prevents any further action.

An IVA will offer to pay whatever is affordable monthly over a five year period, and after that the debt is clear. This can happen even if the creditors end up than 30% of their debts repaid, monthly payments can be as little as £250 per month. Payments are calculated on what an individual or household can afford and are normally over £300-400, significantly less than the existing minimum payments on credit cards and loans.

The IVA was designed initially to be a more easier way for processing individual insolvency cases without ithe excessive costs and court time involved in bankruptcy. As  such an IVA is similar to bankruptcy, but the process is simpler and the outcome being less severe.

The application and set up process takes around 4-6 weeks from the point of application,. Bramley Carrington will do the majority of the work themselves and will only require the debtors for minor activities such as providing evidence and reviewing and signing the documentation.

The proposed IVA will be based on what the debtor can afford to pay over a five year period. The IVA will be made up of sixty monthly payments at an agreed level, it may also include lump sum contributions from, for example, Equity Release,

The approval of an IVA is dependent on receiving a 75% majority of approving votes from the creditors. Most have standard terms for what they will accept, including normally a reduction in the overall level of debt by as much as 75%.

Once approved a standard IVA will run for a five year (60 month) period. During this period payments are made on a monthly basis into a fund that the Insolvency Practitioner governs.

The payments into the fund are supervised by the Insolvency Practitioner. There are normally payslip reviews approximately every quarter, and a full review of the debtors situation every twelve months.

During the period of an approved IVA the creditors are required to freeze all interest on the debts, and they are prevented from pursuing the debts and prevented from taking any legal action related to these debts.

At the end of the five year period, assuming that the IVA has been satisfactorily completed, all of the debts are cleared.

An IVA is a useful idea when someone is unable to pay off their debts but does not want to file for bankruptcy. It can be an attractive option  to creditors as often it presents for them a better result than under bankruptcy.