If you find yourself in a lot of debt and you are having a significant amount of difficulty paying it off such that you think you might never be able to, an Individual Voluntary Arrangement, or IVA, may be an answer to your problems. An Individual Voluntary Arrangement is an arrangement that you and your creditors come to such that you can make reduced payments for a period of five years are in that five years, you pay off a percentage of the money owed. After that five years, your debt is then usually classified as “settled.”

How is an Individual Voluntary Arrangement done?

Because it must be set up formally, a licensed professional has to set up an Individual Voluntary Arrangement. Some places do charge upfront fees to put together a proposal for an Individual Voluntary Arrangement, while others do not.

In general, you’re going to be asked questions about your current financial situation once it’s decided that you qualify to do an Individual Voluntary Arrangement; the IVA professional will ask you questions about your financial situation so that he or she can set up a financial plan for you. Once proposals have been done, you’ll need to check and sign them, return them to whomever is helping you with this program, and that should be all that’s needed to be done.

In some cases, the Court will also need an interim order, such that creditors can’t take legal action against you. If that happens, usually, creditors will also meet, such that you’ll need to attend.

To get your Individual Voluntary Arrangement approved, creditors are going to be called upon to either approve or disapprove of the arrangement. Even if just one creditor votes for the arrangement, it can be approved. If any creditor votes against it AND they hold less than 25% of your total debt, the meeting can be suspended until other creditors have been called upon to vote, in the event they did not vote at the start of the proceedings.

If the creditor who voted against the Arrangement holds more than 25% of the debt you owe, the Individual Voluntary Arrangement will not be approved. That’s because you must have 75% of your debt’s monetary value approved within the Individual Voluntary Arrangement. If creditors do not vote, it is assumed they are voting for the Arrangement.

Once the Individual Voluntary Arrangement is in place, it’s legally binding. You’ll need to keep up repayments, but if you do, when the term of your agreement is finished, you’ll also be free of your debt. That’s true no matter how much of your actual debt remains, and you will be considered debt free at that time.

What the Individual Voluntary Arrangement is NOT

An Individual Voluntary Arrangement is NOT a debt management plan. Debt management plans are not legally binding. In most cases, the Individual Voluntary Arrangement has one affordable monthly payment, and is usually complete after a period of five years. Your mortgage is usually not affected by an Individual Voluntary Arrangement, unless you have an endowment policy links to your mortgage. In some cases, if the property has a reasonable amount of equity in it, some of it may be released at the end to make payments to creditors. In fact, whether or not this can be done may affect whether or not you’re Individual Voluntary Arrangement can actually be approved by creditors, even as you usually can keep your property.