An increasing number of people are going bankrupt in the UK, with the latest figures showing a rise of 11% in the fourth quarter of 2005, IVA, or Individual Voluntary Arrangement, offers an alternative with certain advantages.

Although some people think bankruptcy is an easy option to serious debt since the Enterprise Act 2002 made it possible to be discharged in under a year, that is hardly the case.

Not only are the details of the bankruptcy advertised in the press, etc, but a bankrupt risks losing current and future assets and is also subject to a raft of restrictions.

For instance, a bankrupt cannot do any kind of business without getting consent from the court or informing everyone connected of their status. Nor can they get credit of £250 or more without letting the lender know they are bankrupt.

The Individual Voluntary Arrangement, on the other hand, does not carry any such restrictions. An IVA is suitable for anyone with £15,000 worth of debt or more and can be organised by an Insolvency Practitioner.

The terms of the IVA are agreed at a creditors’ meeting, with a 75% majority needing to vote in favour of the arrangement.

A large proportion of the debt can be wiped out immediately. The rest of the money owed is paid off through a carefully calculated payment plan, arranged according to what the debtor can afford to pay.

As long as they keep up with their regular payments, someone under the terms of an IVA can be debt-free within five years.