Your creditors benefit from an IVA (Individual Voluntary Arrangement) by receiving monthly payments over the five year IVA period. If you own a house, you may also be required to release some equity toward the end of your IVA period as part of your payment to creditors. This is not too surprising since creditors will still be writing off the balance of your debt (In return for the payments you make).

The Creditors need to be satisfied that your repayments are the maximum you can realistically afford. This is all part of what your insolvency practitioner does. The creditors agree to your repayments (usually made for five years) since they will get a greater return from an IVA than if you had been made bankrupt. That's why they also agree to write off the balance of your debt.

IVA's are often thought of as the solution that is fairest to all parties.

Usually the minimum amount creditors will accept as payment will be 25% of your total debt. This gives the creditors the opportunity to recoup some of the debt whilst at the same time allowing you to write off up to 75% of your debt. An IVA is usually a preferable option than bankruptcy to your creditors. With bankruptcy, once assets are sold and the money is divided, creditors may lose a lot of money.

For the latest insights and comments on keeping debt free, as well as more information on IVAs abd alternatives to bankruptcy, read our IVA Zone Blog