Reducing your debt

An IVA or Individual Voluntary Arrangement is a government-approved agreement, tailored to your personal financial circumstances. You negotiate a payment scheme and sign an IVA agreement that makes it a legally binding contract between you and your creditors. You make regular payments each month that are manageable for you and after five years, the proceeds are distributed amongst the creditors. The rest of the debt, which could be considerable, is written off.

Take John and Maureen. John has over £50,000 worth of debts that he is having trouble repaying. He undertakes an IVA and agrees to pay £300 per month to his IVA Account. He makes sixty payments (five years) of £300, which comes to a total of £18,000. The other £32,000 is completely written off, that’s sixty four percent expunged entirely. Obviously the higher the outstanding debt, the greater the amount written off. This should not be used as a way of avoiding repaying your debts, it is a very serious financial undertaking to take an IVA and your creditors may not agree to it.

Of course the exact amount of how much your debts could be reduced by with an IVA is totally dependent upon your individual personal circumstances. Some people find that fifty to seventy five percent of their debts are written off.