The number of people declared insolvent hit a six-year high in the three months to June as the squeeze from high inflation, meagre wage rises and benefit cuts hit the finances of low-paid workers. Individual insolvencies totalled 28,951 in the second quarter, a jump of 4.4% on the previous quarter and 27.3% on the same period last year. The trend had been rising steadily since 2015 to reach the highest quarterly total since the first quarter of 2012.

Personal insolvencies fall into three main categories – bankruptcies, IVAs and debt relief orders (DROs). According to The Insolvency Service, the upswing was driven by a record number of people taking out individual voluntary arrangements (IVAs) –where debtors agree to repay creditors some or all of what they owe: nearly two-thirds (62%) of personal insolvencies in the second quarter of 2018 were IVAs, around a quarter (24%) were DROs and 14% were bankruptcies.

What is an Individual Voluntary Arrangement?

The individual voluntary arrangement (IVA) is a debt solution consisting of an agreement reached between you and your creditors to pay part or all of the debts you owe over a certain period of time. The idea is that, with the help of an insolvency practitioner, you extend the repayment term by reducing monthly repayments and eventually pay off all or most of what you owe.

This kind of repayment agreement is perfect for those who are so swamped in debt that they are literally unable to pay back. It is a form of insolvency less severe than declaring bankruptc and designed to help people deal with unsecured debts like personal loans or credit card debt but will not apply to things like mortgages — that are secured against homes.

How can you get through the IVA process?

If you choose to manage your debts by going down the path of an IVA (individual voluntary arrangement), you will need to find an insolvency practitioner to help you set it up. An Insolvency Practitioner (IP) is someone who is licensed and authorised to act in relation to an insolvent individual, partnership or company. Most of them are accountants or insolvency specialists working in law firms, and they are often referred to simply as IPs  Before they are allowed to provide their services, the IPs must hold a licence and pass the insolvency examinations (JIEB exams); gain some experience in insolvency work; and satisfy an authorising organisation (also known as regulator) that they are fit and proper to act as an IP.

The Insolvency Practitioners obviously must follow the law and their work is monitored by these regulators to make sure that they do. Insolvency Practitioners in London, have undergone the relevant training and qualifications to allow them to practice as insolvency practitioners. An insolvency practitioner follows the statutory regulations laid down in the Insolvency Act 1986, and the Insolvency Rules 1986, and must comply with Statements of Insolvency Practice. In addition to being able to organise IVAs, insolvency practitioners are also qualified to deal with other insolvency related processes. A licensed insolvency practitioner (IP) carries out a wide range of duties in relation to insolvent individuals and companies. Depending on the insolvency procedure they may be required to negotiate with creditors with a view to rescuing the business, or at the other extreme, take over complete control of the company prior to closing it down.

When to apply for an IVA?

Before you decide whether or not an IVA is the right option for you, it might be a good idea to go to a consultation with an insolvency practitioner, either over the phone or in person. After this meeting you will be better placed to decide on whether or not you would like to go down the route of setting up an individual voluntary arrangement. Your Insolvency Practitioner, however, is legally required to present you with alternatives to an IVA and to make you understand the possible risks associated with each of those potential paths.

In order to know whether an IVA is the best option for you or not priot to consulting, you must know that there ara no legal requierements to qualify for an IVA, but you will have to stick to some general rules of thumb followed by the industry. Thus, you generally need have at least  £10,000 in unsecured debt owed to two or more creditors and be a resident in England, Wales or Northern Ireland.

If you find yourself in this situation and you are not fully insolvent — meaning that cannot pay all of the debt that you owe, but you have enough of a regular income to pay some of it, then you should consider an IVA.

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