When you have debts that you cannot meet the payments for, there are a number of options you can explore. Individual Voluntary Arrangements are a useful measure in helping people to get their finances under control, but there are situations in which an IVA is not possible or is not preferable for some reason.
Negotiate personally
If you have debts, for example from credit cards, you can always attempt to contact your creditors direct and ask them to renegotiate your credit agreements, for example through reduced monthly payments. This can be a stressful process, and does not always result in renegotiated terms, as it is essentially up to the creditor to decide whether or not they want to negotiate with you.
Using IVAs
If you are facing bankruptcy because of unsecured debt, an IVA can help you to avoid this consequence. Through an IVA, you are effectively renegotiating your credit agreements, but your Insolvency Practitioner handles all of the negotiations for you. Your IP is also best placed to use to law to protect you from legal action from your creditors, and will initially be able to apply for an Interim Order preventing any such action in the short term.
Legal protection
One of the main advantages to an IVA is that the creditors who are involved in it cannot take any legal action against you while it is elapsing. Providing you keep to the arrangement, once the IVA has completed, they are not able to pursue your debts either and must consider them settled. If you use an Informal Agreement with your individual creditors however, they will be free to take court action against you at any time
Cover
Another advantage to using IVAs, is that they cover all of your unsecured debts. The creditors will have a meeting at which they discuss whether to accept your IVA proposal. As long as enough of them vote to accept it, they will all be bound to it. The IVA is a legal contract, and so uses the force of the law to protect your interests.
Requirements
To get an IVA you will need to satisfy a number of criteria. Typically, you need to have at least £15,000 of debt, to at least 3 lenders. You will also need to have enough income to make IVA payments each month. Normally IVA monthly payments will be no less than £200, although this does vary.
Alternatives
IVAs remove the stress of dealing with your creditors personally. If you cannot use an IVA for whatever reason, there are other options you can explore, such as debt management. Debt management organisations can help by giving you advice about managing your debts, and can also mediate between you and your creditors to reach an Informal Agreement.
If you meet the requirements for an IVA, and are potentially facing bankruptcy because of personal unsecured debts, then they are well worth considering. However, only a professional expert can tell you what options are both available and advisable in your own particular situation.