Individual Voluntary Arrangements
(IVAs) were introduced in the Insolvency Act 1986 as an alternative
bankruptcy.
- In most cases, your total debt repayable will be greatly
reduced with the balance written off by your creditors.
- Your repayments will be for a limited period of time (normally
five years)
- You will know in advance of formalising the arrangement
exactly how much you will pay each month and the total payable.
- Once agreed, this cannot be changed by either side.
- All interest charges are cancelled, so the spiral of debt
is immediately halted.
- All legal action is frozen and all demands, letters and
telephone calls from your creditors will cease.
- Repayments are simplified by a single monthly instalment
regardless of how many creditors you have. You can even
pay by direct debit if you wish.
DEFINITION
An Individual Voluntary Arrangement is a proposal written
by a person owing money (a debtor) and presented to his creditors,
in which he determines how much money he can repay, over what
period of time, and under what circumstances and conditions.
An Individual Voluntary Arrangment consists of 3 stages:
- the making of a Proposal to creditors;
- the making of an Interim Order which will put a stay (stop)
on any bankruptcy proceedings which may have been instigated
by a creditor;
- the Creditors Meeting at which creditors can make a decision
as to the suitablity of the debtors proposed arrangement.
It is the involvement of a Nominee and Supervisor, with
the intervention of the Court, that distinguishes the Individual
Voluntary Arrangement from an informal agreement between
debtors and creditors.
PROPOSAL
There are a number of items that must be disclosed in the
proposal, but otherwise the proposal can be individully tailored
to suit every type of situation. The proposal is basically
a private contract between a debtor and his creditors.
NOMINEE
Anyone who is in financial difficulties and thinks he is about
to be made bankrupt, or is already bankrupt, may ask a Licensed
Insolvency Practitioner to act as Nominee. The debtor will
present the proposal, (although in practice this is normally
written with the assistance of the Practitioner) to the Nominee.
When the proposal is considered to be suitable, an Affidavit
is sworn by the debtor, and the proposal is presented to the
Court. The Nominee consents to act in the matter by becoming
the Supervisor of the Individual Voluntary Arrangment. The
Nominee and Supervisor must be a Licensed Insolvency Practitioner.
INTERIM ORDER
The Court will set a hearing date for the application for
the granting of an Interim Order. Once the Interim Order has
been made, no action be creditors can then be taken against
the debtor without the authority of the Court. The nominee
will then report to the Court concerning the debtors proposal.
At the hearing of the nominees report at court, the date for
the creditors meeting will be set.
The Interim Order will be extended until after the date of
the creditors meeting. The Nominee notifies the creditors
of the meeting which will be between 14 and 28 days following
the hearing of the nominees report.
CREDITORS MEETING
All creditors must be notified of the meeting and all creditors
who are not secured* may vote. The creditors may wish to amend
the proposal and any changes will be discussed and voted upon
at the meeting. The debtor may not wish to accept the amendments
and this could lead to the rejection of the proposal by the
creditors.
The Proposal is accepted if 75% of the creditors voting are
in favour of the proposal. The Chairman must file a report
in Court confirming the outrcome of the meeting and the Court
will agree to the arrangment taking effect. Any petitions
that have been stayed are dismissed and there is no longer
a need for the Interim Order. In the case of a bankrupt applying,
the Court will annul the Bankruptcy Order, and the debtor
will revert to the situation as if the Bankruptcy Order had
never been made.
* A secured creditor is one who has a direct right over an
asset of the debtor, eg a Building Society with a mortgage
over a house.
SUPERVISOR
On approval of the debtor's proposal the nominee is usually
appointed as Supervisor, unless the creditors at the meeting
have voted otherwise. The Licensed Insolvency Practitioner
will act as Supervisor throughout the duration of the Individual
Voluntary Arrangement. The Supervisor will abide by the terms
of the proposal and normally will work in a number of different
ways to assist the debtor in coming to terms with his basic
situation.
FINALISATION
At the sucessful conclusion of the IVA the Supervisor will
issue a Certificate of Compliance. This is filed with the
Court and the debtor is then free to go about his normal course
of business without any encumberances.
What are the advantages of a voluntary arrangement against
going bankrupt?
- It gives you more say in how your assets are dealt with
and how payments are made to creditors.
- You may be able to persuade your creditors to allow you
to retain certain assets (such as your home).
- You will obviously have to act responsibly and flexibly
in order to reach agreement with your creditors.
- You avoid the restrictions which apply to a bankrupt.
- Because you will not have to pay some of the fees and
expenses which are charged in a bankruptcy, the overall
costs are likely to be less
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