A successful IVA can reduce the overall amount a debtor is expected to repay and generally could obtain more for creditors than bankruptcy could.

An affordable and logical option for many in debt, an IVA is made readily available through ClearDebt - a company created by Hodgsons to help consumers receive effective, personal debt relief. All ClearDebt's advice is free and the IVA fees - which are part of the negotiated affordable payment to creditors - are, we believe, among the lowest in the market.

An IVA is a legally binding agreement for the repayment of some or all of the debt owing to your creditors over an agreed time. This might be by way of monthly contributions, often paid over 3 to 5 years, a lump sum payment following the sale of assets or the re-mortgaging of a property.

To be able to take advantage of this alternative to Bankruptcy, a debtor must first have income and/or assets that will ensure creditors get better returns than if Bankruptcy proceedings were to be instigated. The simple way of calculating whether this is the case is to take your net take home pay (or drawings from your business if you are self-employed) and then deduct the amount you need for your basic general costs of living. The amount of surplus that is available, before any debts are repaid, is the amount that may be contributed to an IVA.

An IVA may be taken up whether the debtor has been made Bankrupt or not.

If Bankruptcy proceedings have been threatened, or one of your creditors has commenced other legal action against you, it is possible to apply for an Interim Order. This is an application to court to advise that you intend to put a proposal for an IVA to your creditors. Once the Interim Order is granted you will have protection from any legal proceedings, until your creditors have had an opportunity to decide whether or not to agree to the IVA proposals.

The proposal must be accepted by 75% in value of all the creditors present (or by proxy) at a creditors' meeting - called by the Nominee (the practitioner representing the debtor). If the proposal is accepted at the meeting, all creditors - present or not - are bound by its terms, providing they have received notice of the meeting. It is often the case that creditors vote by post.

Once an IVA's terms have been accepted by creditors, it is the responsibility of the person proposing the IVA to keep to those terms. This usually means that all contributions must be made on time. If this does not happen, and the IVA falls into default, the Supervisor of the IVA will be required to make sure that this is made good or they will have to advise the creditors that the agreement has failed. They will, however, take all steps to ensure that this situation never occurs.

An IVA lacks the stigma of Bankruptcy, can enable a small business person to continue to be a director and is suitable for both complex personal financial situations and many straightforward consumer debt cases.

If you fall into the latter category, we recommend you contact us immediately, for clear, simple, free advice.

IVAs have many advantages over Bankruptcy:

• It is often less costly (in terms of fees and disbursements) to implement than Bankruptcy proceedings.
• There are no restrictions placed on the debtors' actions, unlike Bankruptcy.
• The debtor often retains ownership and control of all of his or her property.
• It is often quicker to implement - the sale of assets is often not required - remortgaging, for example, may produce the funds required.
• The debtor, with agreement of the Supervisor, controls any necessary disposal of assets and may therefore be able to realise better prices.
• IVAs are not advertised, unlike Bankruptcy, in the local paper but they do appear on the register of voluntary arrangements.

Of course, there are some possible disadvantages when compared to Bankruptcy:

• Because returns to creditors need to be better than in Bankruptcy, the debtor may have to dig a bit deeper and for longer than under Bankruptcy.
• The period of paying income into an IVA may extend past the maximum period for income payments made under Bankruptcy, which is 3 years. And that is only if the Trustee in Bankruptcy obtains an Income Payments Order. A Bankrupt, provided they cooperate, will be automatically discharged from bankruptcy 12 months after they were made Bankrupt, however, it should be noted that the overall consequences of Bankruptcy are likely to last much longer than this in most cases.

To find out whether this solution is right for you, please call us on 0161 969 2023.