An Individual Voluntary Agreement is another name for the more commonly used term Individual Voluntary Arrangement.

Individual Voluntary Agreements (Or Individual Voluntary Arrangements or IVAs) were set up towards the end of the last century to deal with the growing problem of individual insolvency and were intended to be a less drastic measure to bankruptcy which, while highly effective in ridding people of a lifetime's debt, were looked upon with a certain derision because of the stigma which was attached to them.

An Individual Voluntary Arrangement is a legal document which is drawn up by a qualified insolvency practitioner who acts as a kind of intermediary between the debtor and his or her creditors. The insolvency practitioner will look at the overall debt and then look at the income and expenditure of the person in debt. As long as the income exceeds expenditure by a fair amount, provisions will then be made to reduce the overall debt significantly and then pay it off over a period of (usually) five years, although this can be made to vary in individual cases or where the circumstances of the applicant require significant alteration to established procedure.

During the time the IVA is in force the creditors may not contact the debtor in any way. If they do so they will face stiff penalties imposed by the law under the terms of the document. It is worth pointing out that, partly due to this clause, all creditors must collectively agree to the action taking place and the total debt is treated more like one lump sum than a series of different debts to different parties.

A big advantage of an IVA is that a large chunk is wiped off the total debt at the start. As much as sixty percent or more may be written off in this way. This is what makes this a far more attractive proposition than a normal debt management plan. Nevertheless, ordinary debt plans such as this form the vast majority of settlement programmes because of the necessities of income, and also because there usually needs to be at least three parties who are owed money.

Roughly only one in eight debt resolution plans are IVAs, while the rest comprise the more normal schedules as described above, without the additional advantage of the great chunk being taken out of the total sum at the outset. Therefore it goes without saying that an Individual Voluntary Agreement should be the option to go for every time, if at all possible.