PEOPLE struggling with problem debt can take out an individual voluntary arrangement (IVA).

They are a way you can manage all your debt without having to file for bankruptcy.

Here's everything you need to know about them.

What is an IVA?

An IVA can be taken out if you're struggling with multiple debts from different providers and can't keep up with the minimum repayments.

They are a legally binding agreement, which means lenders have to stick to it.

Crucially, lenders also can't chase you for debts while an IVA is in place.

An IVA can last for five to six years, if you're repaying one in monthly instalments.

How do I apply for an IVA?

You can't apply for an IVA by yourself and have to go through an insolvency practitioner.

You can find an authorised one on the gov.uk website.

It's worth approaching a few practitioners and asking for an estimate of how much it will cost to set up and manage one for you.

You can then make a better-placed judgement as to who you want to go with.

Some insolvency practitioners offer their first meeting for free or at a reduced rate, which can save you some cash.

Will an IVA affect my credit score?

The simple answer is yes. An IVA will be recorded on your credit report, which means your score will go down as a result.

A lower credit score makes it harder to borrow money.

This is because when you apply for credit, such as a loan, credit card or mortgage, the lender checks your credit score to help them decide if you are likely to pay them back.

If you have a low one, they will deem you to be high risk and could reject an application.

An IVA stays on your credit score for six years, starting from the date it was approved and it won't be removed if you finish it earlier.

As your IVA ages and reduces in size, your score should improve, as lenders tend to pay more attention to your most recent credit history.

How do I repay an IVA?

You pay an IVA to your insolvency practitioner.

This might be in the form of monthly payments, a lump sum or a combination of both, depending on your circumstances.

The repayment plan should be based on an amount you can afford and your creditors will also need to agree to it.

If you're making monthly payments the IVA will usually last for five or six years.

The insolvency practitioner reviews your case each year and may increase or decrease.

For example, if you get a pay rise at work, you'll be expected to pay more into your IVA.

Before considering an IVA, make sure you get free and impartial debt advice first.

There are a number of organisations you can turn to such as StepChange and the National Debtline.

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