Debt Consolidation: Individual Voluntary Arrangements- A New Alternative to Bankruptcy

Individual Voluntary Arrangements- A New Alternative to Bankruptcy

This May, the Department of Trade and Industry in the UK found that there
were 10,091 bankruptcies in the first quarter of 2005. This represents an
increase of 24.5% on the corresponding quarter of last year.

Bankruptcy can leave an individual feeling ashamed, depressed and out of
control. Furthermore, for many the stigma of bankruptcy can be too much to
bear.

However, there may be an alternative to going bankrupt which can also help
people in serious debt to make a fresh start.

The Insolvency Act of 1986 introduced The Individual Voluntary Arrangement
(also known as an IVA) as an alternative to bankruptcy.

The idea behind the introduction of the Individual Voluntary Arrangement
was to enable people facing financial difficulties to come to a formal
agreement with their creditors rather than having to face bankruptcy. If
an IVA is agreed between the debtor and creditor:

Interest on the loan is frozen
Legal proceedings are stopped
The overall debt is reduced

An Individual Voluntary Arrangement is generally seen as a more favorable
option than bankruptcy from both the debtor's and creditor's perspective.
This is because there are no fees or legal proceeding involved with an
IVA, unlike with bankruptcy. Furthermore, from the creditor's point of
view, an Individual Voluntary Arrangement offers a greater repayment of
the debt than would otherwise be achieved if the debtor were made bankrupt.

IVAs represent an exciting new opportunity to those facing serious debt to
both avoid bankruptcy and to make a fresh start.

Mike Curry is the head of Clear Start- a free national support service for
those facing serious debt. Clear Start offers independent advice on debt
management and individual voluntary arrangements. For more information
please visit Clear Start.org

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