An IVA should not be confused with a Debt Management Programme which takes a more informal and therefore less conclusive approach offering creditors payment in full, over whatever length of time it takes to clear their debts.  It is surprising how few people actually know that the option of an IVA even exists, hopefully the following notes will explain the process......
 
The majority of IVA cases are based around one, affordable, monthly, payment, over a period of 60 months.  This payment is carefully calculated with the debtors assistance and takes into account ALL of their assets and liabilities, their income and their cost of living expenses.  The amount payable to creditors is determined by the amount that the debtor can reasonably afford to pay after their normal cost of living expenses have been deducted from their income.  This will ensure that the debtor never gets into arrears or misses paying any of their priority commitments such as their mortgage or rent, car finance, utility bills, council tax, etc.
 
An IVA proposal has to be prepared by a licensed Insolvency Practitioner (IP) who then presents it to creditors at a creditors meeting.  Before this meeting is held a draft copy of the proposal is sent to the debtor to be approved.  It is at this point that any alterations are made if necessary.  Once approved the debtor is asked to take the proposal to their local county court to have it registered.  In cases where legal action against the debtor is well advanced there is a protection order that can be applied for known as an 'interim order' but this is done at the IP's discretion.
 
Once the court procedure is completed a copy of the debtors proposal is sent to each creditor giving them notice as to the time and the place of where and when the creditors meeting will be held.  The IP will normally chair this meeting, acting as an honest broker between the debtor and their creditors ensuring that the proposals being made are both realistic and fair to all of the parties concerned, however, this is not mandatory.  In the case of a consumer 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.  It is also unusual for the debtor to be asked to attend the meeting, they will more likely be asked to be close to a telephone whilst the meeting is being held.  Things may be different if the debts being considered where incurred during commercial activities when in which case the creditors may well want to meet the debtor face to face.
 
At the meeting, creditors can either vote to accept, or reject the debtors proposals or accept them with modifications but these can only be made with the debtors consent.  The rules of an IVA state that providing 75% (in value terms) of those that have voted, vote to accept the proposals (with or without modifications) then the IVA is agreed and becomes legally binding on all other parties whether they voted or not.  The effect of this is that, any creditor who chooses not to vote at the creditors meeting is bound by the decision of those who do.
 
When an IVA is accepted the IP's role becomes that of supervisor, monitoring the 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 debtors 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 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 IVA.  This situation should be avoided at all costs.  If a debtor experiences difficulty in making the agreed payments they should contact their supervisor who may be able to re-negotiate with creditors.
 
Upon the successful completion of the 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 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 IVA is approved by creditors and a realistic way in which a debtor can retain their property.

I am currently with an IVA and am coming up to my third year.However my payments have gone up over the last year by £200. I 'm now paying out more a month than i was before i stated the IVA. I have asked the company how this can be if they say they freeze the interest. I am now finding it hard again to pay bills.Is there anyway out of an IVA once it is started. Could i contact all all my creditors and agree to pay them individually.