Individual voluntary arrangement (IVA)

An individual voluntary arrangement (IVA) is a less serious option than going bankrupt for people faced with debts they do not think they can repay.

IVAs are legally binding contracts between a borrower and all of their creditors to repay them only what they can realistically afford with the balance of their debt being written off.

People taking out an IVA need the approval of a court and the debtor is placed under the control of a supervisor and insolvency practitioner.

Typically creditors agree to waive interest on debts in return for receiving regular payments each month over a set period, normally around five years, with monthly payments calculated on the person's income and expenditure.

However, IVAs are not normally allowed for people owing less than £15,000 and the borrower will typically need to repay at least £200 a month.

Moreover, homes and assets can still be placed at risk, if creditors do not exclude them from the IVA.

IVAs are recorded publicly, and will almost certainly be added to your credit file affecting future applications for credit.