An IVA is certainly not a solution for everybody, due to the fact that it ties in its individual for up to six years on quite a penal regime.
The IVA is a legally binding contractual arrangement by which someone like a sole trader can avoid the consequences of bankruptcy.
The sole trader would propose to make payments to the creditors which would result in a better return than could be achieved for them from a bankruptcy.
The payments are made over a period of time, usually 60 months and sometimes also lump sum payments.
For instance if you have property, then any equity from this would be introduced in year 4 of the arrangement.
                            Unlike debt management, an arrangement is binding on all those who have notice of the meeting of creditors whether they vote for it or not.
This means that no one creditor could take unilateral enforcement action.
A sole trader would use the voluntary arrangement as a means to ensure the survival of a business which is a going concern but which has built up historic debt problems.
The trader may wish to avoid the problems of bankruptcy, and also wish to make a return to creditors more than would be available in a bankruptcy.
In order to propose an IVA a sole trader will need to engage an Insolvency Practitioner to help him put together a proposal for his creditors.
The IP needs to certify that the proposal is workable and that he will agree to act as supervisor of the arrangement.
The IP will then call a meeting of creditors to be held about three weeks hence.
At the meeting, the IP needs to achieve a majority of 75% of those voting, to vote in favour of the proposal.
If this is achieved, then every other creditor is bound even if they voted against the proposal.
You may have a situation where only one person votes at the meeting, but if this vote is in favour the proposal will be implemented.
  Once agreed the sole trader will make payments each month according to his proposal.
The IP will collect those payments and distribute them each year.
The fees of the IP will have been set out in the proposal and voted on by the creditors.
He will take his fees out of the payments made by the debtor.
  If you are a small trader and you think that you may benefit from a Sole Trader IVA please seek some advice.