IVA's - or Individual Voluntary Agreements - are debt repayment plans of around 5 years, entered into between a debtor and his or her unsecured creditors to manage problem debts. They were originally brought in by the Parliamentary Insolvency Act of 1986, which laid out a number of processes and rules surrounding the Act.

It's important that if and when considering setting up an IVA, you speak to a financial advisor or debt management organisation for advice, as you will need assistance and help from a specialist insolvency practioner with setting up and managing the IVA.

Firstly, your practioner will help you consider which creditors should be included. This is down to the decision of the debtor, and once the proposal has been made, the creditors will make a decision as to whether the offer is deemed acceptable. There is one predominant requirement though for this decision, and that is that the IVA offer amount must be in excess of what any creditors might receive if the debtor entered into formal bankruptcy. The bonus is that if the IVA is agreed to, your creditors are obliged to stop applying any further interest or charges to the debtor's outstanding debts.

The next stage in setting up the IVA is to create the creditors' offer - or proposal. This will lay out the debtor's financial situation and explain the various reasons as to why the IVA should be considered. Importantly, it will also include a key calculation which shows the return which the creditors can expect from the IVA, post any costs, and express this as a comparison to the amount they might receive if the debtor entered into bankruptcy.

The proposal will be sent out with a creditors' meeting request, usually organised at the Insolvency Practitioner's Office. It's usual however for creditors to simply return their vote by post rather than attend in person. Three quarters of the creditors must agree to the proposal for it to be approved. If they do, the IVA will then be effective, and the parties involved all bound to its terms, regardless of if, or how, the remaining creditors voted. It's worth noting too that when the creditors review and vote on the proposal, they may request changes to it - which the debtor will have to consider before the agreement can be formalised.

Once the IVA has been agreed and is in place, the debtor's Insolvency Practioner will then automatically become the IVA's Supervisor, and it will be his/her duty to make sure that the IVA's terms and conditions are met. To do this, he or she will provide regular reports to the debtor's creditors and make the payments on the debtor's behalf. This is one of the main benefits of course of the Individual Voluntary Agreement - once it's agreed to, you have a fixed payment plan to stick to and you should not need any direct contact with your creditors from that point on.

Additionally, the IVA is a final solution to the problem debts - once its term ends, as long as you've kept to the payment terms of the agreement, the insolvency practitioner will provide a final report to the creditors and the IVA will be discharged, leaving you debt free.