The notions and particulars of debt management might appear to be astonishing and complicated at possibly the worst time - when a person in debt is scared and looking for a way out. With Individual Voluntary Arrangements (IVAs), Debt Management Plans (DMPs), Debt Relief Orders and Bankruptcy all as possible avenues, it can be difficult to take in how they all work, the different outcomes and therefore what is best depending on somebody's particular debt situation.

With IVAs in particular, people regularly ask the question "how does an IVA work?"

If a person in debt does not know which alternative is better for them, then the first thing should be to speak to a debt advisor, who should be able to advocate whether an IVA or another kind of debt settlement is best for the person, based on their specific situation regarding his/her debts. If a person owes ?15,000+ in debt to at least two or three creditors and has significant assets (e.g. a home) then an IVA might just be a good idea for them - otherwise, if this isn't the case, the advisor should advise another option.

When the information has been ironed out, the advisor will write an IVA proposal to pass on to the creditors, which will be given to them before the creditors meeting. Obviously, before sending it, the advisor should run it by their client, who will have to be okay with it as well. At the subsequent creditors meeting, the creditors will have the opportunity to ask for amendments to be made to the IVA, if required. In the end, if 75% or more of the creditors agree with the set terms of the IVA proposal, its application will be successful - making the proposal legally binding - and payments can begin.

The regular amounts paid to creditors will have been agreed as part of the proposal process, with the creditors in agreement with the amount being repaid (if they previously agreed to the terms of the IVA). An IVA lasts for five years (sixty months), during which time creditors are not allowed to pursue legal action against the individual in debt - unless the IVA fails, of course.

When the last payment on the final month has gone through, the IVA is considered completed. Any remaining debts are written off - despite the amount - as part of the process and the IVA agreement. Even though the IVA will feature on the debtor's credit history for a further year, they'll be declared legally debt-free.