Individual Voluntary arrangement ("IVA")

The IVA procedure is widely used as an alternative to bankruptcy, and is generally a compromise reached between an individual and their creditors. Consequently, the IVA procedure avoids many of the constraints and stigma associated with that process.

An IVA is available to insolvent individuals whether trading a business or not, who make a proposal to their creditors with a licensed insolvency practitioner acting as Nominee. The procedure makes a formal arrangement to compromise unsecured debt including arrears of VAT, income tax and consumer debt including loans and credit cards.

In certain circumstances, the debtor may seek protection of the court from legal proceedings brought by creditors whilst the proposal is agreed.

Usually IVAs involve agreed monthly contributions from income over a 5 year period and/or realisation of equity in a matrimonial property at some point during the course of the arrangement. The proposal is required to comply with insolvency legislation but can be quite flexible but must result in a better return to creditors in full and final settlement than would be available in a bankruptcy scenario.

Creditors are invited to vote on the proposal by a decision making process determined by the Nominee. To be approved, creditors’ votes must be 75% in favour by value of debt. The proposal may be accepted as drafted or with modifications as long as they are acceptable to all parties. Once approved, all creditors are bound by the arrangement and the Nominee becomes the Supervisor to monitor its implementation.

The Supervisor’s responsibilities are generally to ensure that;

The individual complies with the terms of the arrangement
To agree the claims of the creditors
To realise the assets pledged to the arrangement
To make a distribution to creditors

Once the arrangement has been implemented and run its term, the Supervisor gives notice to creditors that effect, makes a final distribution of the assets in the arrangement to creditors and seek his release.