[John Smith]

It is very important that consumers do not confuse an Individual Voluntary Arrangement (IVA) with a Debt Management Plan, which are not legally binding.

The Individual Voluntary Arrangement (IVA) team are often surprised to see that few people actually know that the option of an Individual Voluntary Arrangement (IVA) even exists.

Most Individual Voluntary Arrangement (IVA) cases are based around one, affordable, monthly, payment, over a period of 60 months.

An Individual Voluntary Arrangement (IVA) proposal has to be prepared by a licensed Insolvency Practitioner (IP) who then presents it to creditors at a creditors meeting.

In the case of a consumer Individual Voluntary Arrangement (IVA) it is unusual for any creditors or their representatives to attend the creditors meeting as most prefer to vote by fax or by post.

The rules of an Individual Voluntary Arrangement (IVA) state that providing 75% (in value terms) of those that have voted, vote to accept the proposals (with or without modifications) then the Individual Voluntary Arrangement (IVA) is agreed and becomes legally binding on all other parties whether they voted or not.

When an Individual Voluntary Arrangement (IVA) is accepted the IP's role becomes that of supervisor, monitoring the Individual Voluntary Arrangement (IVA)'s progress and ensuring that the terms and conditions that were agreed to at the creditors meeting are properly adhered to.

It is the debtor's responsibility to pay the agreed payments to the IP who will then ensure that these payments are distributed to all creditors on a pro-rata basis in accordance with terms and until the successful completion of the Individual Voluntary Arrangement (IVA). It is in the debtors own interest to maintain their payments as failure to pay will almost certainly result in the failure of the Individual Voluntary Arrangement (IVA).

Upon the successful completion of the Individual Voluntary Arrangement (IVA) the debtor will be considered debt free even though they may not have actually paid off all of their debts in full. Any outstanding balances are written off (known as a composition of debts) and the debtor is then free to make a fresh financial start.

It is worth noting that if you do enter into an Individual Voluntary Arrangement (IVA) with your creditors and you have an endowment policy linked to your mortgage then you may be expected to cash it in and pay the proceeds into the arrangement. Likewise, if your property has a reasonable amount of equity then it is likely that a some of it will have to be released at sometime during the arrangement (usually the end), so it can be paid to creditors. Drastic as this may sound it can be a deciding factor in whether an Individual Voluntary Arrangement (IVA) is approved by creditors and a realistic way in which a debtor can retain their property.