Mr M was then defaulting on his mortgage and moved house to be with his new wife, leaving a shortfall to the second chargeholder. He was then made redundant and remained unemployed for three months using credit cards to make up the shortfall on the benefits that he was receiving.

On gaining employment, he took stock of his affairs and realised he had debts of £57,300. Mr M approached a charity with a view to doing a debt management plan, but as he only had £300 per month to pay towards his unsecured creditors, it would have taken nearly 20 years to pay off his debts. He was then directed to Phillip Allen to put forward an Individual Voluntary Arrangement ("IVA").

The proposal put forward to and accepted by creditors was to pay £300 per month for 60 months and at the end of that period to re-mortgage the new house and inject £7,300 into the Arrangement.

Mr M made 25 payments totalling £7,500 into the IVA and then had the opportunity to take up an offer of help from a relative to make an offer of an additional £18,500 in full and final settlement of the Arrangement which creditors agreed to at the variation meeting. In total Mr M had paid £26,000 to discharge in full liabilities of £57,300, so he had written off £31,300 by using the IVA.