An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors. The agreement sets out a payment plan to repay creditors either in full or an agreed percentage of their debts.
Objectives of an IVA
The objectives of an IVA are:
- To give an individual the opportunity to make a formal proposal to settle their unsecured debt within a reasonable time frame.
- To give creditors a better financial return than if the individual was to be declared bankrupt.
- To freeze interest and charges and prohibit creditors demanding additional payments.
What does an IVA Consist of?
The individual must declare all unsecured debts in an IVA and discuss the proposal they feel capable of meeting with an insolvency practitioner. The proposal includes details of the individual’s income and expenditure with a statement of assets and liabilities and a comparison to the expected outcome in bankruptcy.
IVA proposals generally fall into one (or more) of the following categories:
- Monthly contributions from surplus income (usually over a period of five years).
- A lump sum from a third party.
- The sale of assets owned by the debtor.
- A combination of the above.
What Protection is Available to a Debtor?
Should the circumstances dictate, the debtor can apply to the court for an interim order. The court, on considering the debtor’s financial situation and outline proposals for an IVA, may grant an interim order which prevents creditors from taking action against the debtor (including bankruptcy petitions) whilst the IVA proposals are prepared, sent to creditors and considered.
How is an IVA Agreed?
The IVA proposal is produced (usually with the assistance of the insolvency practitioner) and the debtor nominates an insolvency practitioner to act as nominee. The nominee, if he believes the IVA is likely to be accepted by creditors, serves the proposal on creditors, together with a date for a decision procedure. Creditors may approve, modify or reject the proposal.
What Happens After an IVA is Agreed?
When the proposal is approved, the nominee becomes the supervisor (or the creditors can choose to appoint an alternative) and takes responsibility for implementing the arrangement in line with the terms of the proposal. The supervisor is responsible for receiving payments proposed within the IVA and distributing them to creditors in line with the terms of the proposal. The supervisor may also consider requests to vary the terms of the arrangement and present such requests to the creditors. In the event of default on the terms of the arrangement, the supervisor may petition for the debtor’s bankruptcy.
What Services can PBC Business Recovery and Insolvency Undertake?
PBC Business Recovery and Insolvency can undertake the following services:
- We can advise you whether an IVA (and interim order) is appropriate.
- Where appropriate, we will firstly assist you with the preparation of the proposal.
- We will then act as nominee and convene the decision procedure.
- Should the proposal be approved, we will then act as supervisor.
- We can act on behalf of creditors who have received IVA proposals prepared by other insolvency practitioners. If necessary, we can advise on whether the proposal should be accepted or modifications proposed.