IVA Individual Voluntary Agreement 

Debt management entails an informal agreement (negotiated by a third party) between you and your creditors. A debt management plan allows you to clear your debts over a fixed period of time by making (reduced) monthly payments.

Debt management companies claim that a debt management plan is the best option for a debtor who is unable to make all his or her monthly payments because it is not a legal agreement, thus, there is no risk to their personal assets or property; it offers flexibility with monthly payments should the debtors financial circumstances change at any time; and last but not the least, it offers the opportunity to start afresh where their finances are concerned. However, the debtors need to opt for a debt management plan cautiously because it will undoubtedly affect their credit score negatively rendering you unable to apply for credit.

The debt management expert will make a comprehensive list of your monthly income and expenditures allowing you to ascertain the amount you can comfortably contribute to pay off your debts every month. He or she will then approach your creditors with a new (timed barred) payment plan that will probably allow you to pay lower interest rates. Moreover, the payment plan is flexible to the extent that the terms of payment can be negotiated again with the creditors in case of a significant change in the debtor's financial situation.

Individual Voluntary Agreement (IVA)

An individual voluntary agreement (IVA) refers to a legally binding contract between a debtor and his creditors that is supervised by a third party (usually a Licensed Insolvency Practitioner) and helps avoid bankruptcy. Contrary to popular belief, it should be kept in mind that just because you are on the brink of bankruptcy, your creditors will be happy to sign an individual voluntary agreement. They will agree to sign an individual voluntary agreement only in cases where the payment they receive will be higher than what they will be eligible for in case the debtor goes bankrupt.

According to experts, the key components of a successful individual voluntary agreement are an honest declaration of the debtor's assets and future earnings and the ability to offer higher returns to creditors than what they will receive in case the debtor goes bankrupt. It is important to note that in case the debtor hides his or her assets or makes false claims, the individual voluntary agreement will become null and void. An individual voluntary agreement has various advantages including but not limited to the debtor's ability to continue to work and generate income without the creditors claiming a stake in his or her personal assets; flexibility to adopt the payment conditions to suit the debtor's changing financial circumstances; and not being bound by the restrictions of a bankruptcy.

Debt management

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