| An IVA enables an individual to make a formal proposal for payment to creditors through an Insolvency Practitioner. The proposed payments will be less than the full amount of the debt owed but the creditors would be accepting the offer in full and final settlement of their claim.
The proposal will be tailored to meet each individual’s circumstances but typically would involve the paying of a monthly payment, a lump sum or some combination of the two. Proposals can also take account of irregular income such as overtime or bonuses.
Creditors have the right to vote whether to accept or reject the proposal. If accepted, a legal agreement is created which is binding on the individual and their creditors.
An IVA might be considered as an option for one of two reasons:
- To avoid Bankruptcy where that is considered too drastic a step, and may have unwanted personal repercussions.
- Where the option to make reduced payments would result in an unreasonably long repayment period to clear the debts in full.
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