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An Individual Voluntary Arrangement (IVA) is best summarised as:

1. An arrangement between a debtor (you) and his
creditors (people you owe money to).

The debtor pays back to the preferential and unsecured creditors "X" pence in the pound over a period of years (usually between 3 and 5 years). Secured creditors are unaffected by the IVA.
The debtor does this by selling assets and/or making voluntary contributions (after deducting reasonable domestic living expenses) to his creditors. The voluntary contributions are normally paid every month.
The arrangement is supervised by a licensed insolvency practitioner, who holds the funds on trust and distributes the funds pro-rata to creditors - usually annually. The supervisor must ensure that the debtor complies with the terms and conditions of the IVA.

2. The proposal is made under the formal procedures of
the Insolvency Act 1986.

It must be approved by 75% of the creditors who are present (either in person or by proxy) and voting at the meeting. The creditors' votes are taken on a value basis. The creditors have the option to accept, reject or modify the proposal.
If the proposal is approved, it is binding on all creditors - even if they did not vote or voted against the proposed arrangement.

Summary of Advantages and Disadvantages

Advantages

Generally, the disadvantages of bankruptcy do not apply.
A debtor (under an IVA) will be able to continue to act as a director of a limited company.
There is no automatic vesting of assets in the supervisor. Therefore, the debtor maintains control of these assets, rather than in the case of bankruptcy where the trustee-in-bankruptcy has control over the assets.
The debtor may be able to retain a greater proportion of his income than in bankruptcy.
The debtor may be able to keep his matrimonial home (generally) as long as he can keep up his mortgage payments.
An interim order can protect the debtor while the proposal is being considered by the creditors. This is a very powerful tool, as the effective operation of the interim order: - Stays all bankruptcy proceedings, and - All other legal proceedings subject to the leave of Court life.
An approved IVA binds all creditors. This is not the case in a debt management scheme
Financial benefits - as a result of only paying back a portion of the debts due to his creditors, the debtor effectively saves the amount not paid back. The amounts that are repaid are interest free.

Disadvantages

The period of the IVA (normally 3 - 5 years) is likely to be longer than the period of bankruptcy (normally 1 year). As the IVA must be approved by creditors, creditors will generally want a higher repayment in the pound, and therefore go for a longer repayment period.
The debtor has ongoing obligations. In bankruptcy there is (commonly) no ongoing obligation whereas the IVA will require (say) voluntary monthly contributions for a 3 - 5 year period. This can often be a significant obligation.
The IVA has some risks. The risks and costs associated with an IVA are as follows:

   - The nominee’s fees are normally paid in
     advance - with no certainty of the
     proposal being approved.

    - The proposal may be modified – to be
     more onerous than originally envisaged.
The debtor’s credit rating is likely to be affected in the mid term.
The supervisor is usually contractually obliged to bankrupt the debtor if he fails to comply with the IVA. So, if in the case of (say) an “income only” proposal the debtor falls behind in his monthly contributions for greater than (say) 2 months, then the supervisor must petition for the debtor’s bankruptcy. The grounds of default are determined by the terms of the proposal.