Published in Debt Advice Features on Saturday, December 09 2006

Bankruptcy sometimes cannot be avoided, in some cases people do not want to avoid bankruptcy if they are hopelessly in debt and cannot afford to repay anything back and do not have sufficient assets to lose, then bankruptcy may offer welcome relief from a desperate situation and give them a chance for a fresh start. There are solutions that people can take to avoid bankruptcy proceedings, read more.

Bankruptcy can sometimes be avoided by entering into an Individual Voluntary Arrangement (IVA) with your creditors.

The IVA is an arrangement, to pay back all or in most cases a certain percentage of your debts. The percentage is determined by you agreeing to pay back as much as you can over a 5 year period, but normally not less than 25% return to your debts.

An IVA can be arranged by a licensed Insolvency Practitioner, a proposal is drafted up outlining your offer of payment into the IVA for the 5yrs, this proposal is then sent to your creditors through a “Meeting of Creditors” (MOC) here the creditors will vote on the IVA, as long as 75% (in value) of your creditors are in agreement that the IVA is the best offer for them then the IVA is upheld.

An IVA is normally proposed as a direct comparison to bankruptcy, the creditors are interested in what is best for them, in terms of how much money they would get back in bankruptcy and how much they would get back in an IVA, if the IVA is proposed correctly then the IVA should look the best option for the creditors.

An IVA also may look more attractive to your creditors because:-

- It allows the creditors to have greater control over the money they receive.
- It may be cheaper than bankruptcy leaving more money for them.
- The IVA is monitored for the 5yrs through the supervisor of the IVA and would allow the creditors to get more money if your circumstances changed, (e.g. If you had an increase in salary you would be expected to contribute all or in most cases a part of that increase into the IVA)

An IVA may be good for you as it avoids the restrictions and costs that bankruptcy imposes, you can also reach an agreement with the creditors in terms of your assets, such as home.

For more info on an IVA, please click IVA Debtline