Changes in the availability of credit coupled with the economic recession have resulted in many more people finding it difficult to cope with their financial situation.

As they have struggled with their debt mountain they have been looking for various methods of easing their plight and one that has received a great deal of attention is the Individual Voluntary Arrangement known popularly as an IVA.

IVAs are a legal arrangement whereby debtors agree to pay their creditors a fixed sum of money, usually a proportion of their total debt over an agreed period. usually 5 years. The creditors then agree to write off the balance of the debt after the period has been successfully completed. A key feature is that 75% of creditors, by value, need to agree to the arrangement. So if for example one creditor represents more than 25 % of the total debts and votes against the plan it will fail.

Since IVAs are a legal arrangement they have to be arranged by professionally qualified individuals known as Insolvency Practitioners.

Normally the Insolvency Practitioner will apply to the Court for an interim order which will freeze the situation so creditors cannot chase for the money whilst the details of the IVA are being prepared for presentation to them. There will then be a creditors meeting at which those creditors attending or having sent proxies will vote. Once the plan is in place the Insolvency Practitioner assumes the role of Supervisor, whose job it is to see that the debtor meets all his payments. It is sometimes possible for a one-off lump sum payment to be made instead of regular payments.

Often, debtors will be asked to contribute any cash that can be raised by surrendering insurance policies or even remortgaging to increase the sum payable to creditors if they are homeowners with a reasonable amount of equity in their property.

IVAs are not suitable for everyone. Homeowners with large amounts of equity and a good income may find it more advantageous to remortgage in order to settle their debts. People with low incomes or who have lost their jobs will not be able to commit to future payments.

Experts advise that anyone considering an IVA should consult a Licensed Insolvency Practioner before taking the step. They can be found in Yellow Pages or by searching the web