Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement (IVA) is a formal agreement between a debtor and his or her creditors and must be supervised by a Licensed Insolvency Practitioner. Initial consultation to assess the full position and the best way forward is free. An IVA allows a debtor time to pay his debts and / or compromise his debts ie agree how many p/£1 will be paid. It is a full and final settlement. Once agreed no creditor can take legal action to recover their debt.
Click here for a useful booklet called “ Is an Individual Voluntary Arrangement Right for Me?”
Getting Started
A proposal to the creditors is formulated; this sets out how the debtor proposes to repay an agreed percentage of what he or she owes. The proposal is sent to creditors together with a Notice calling a meeting at which the creditors vote for the acceptance of the proposal or make suggested changes. If 75% of creditors by value who vote, vote for the proposal it is binding on all creditors whether or not they voted.
The agreed proposal is legally binding on all parties to the agreement, if the terms of the agreement are kept, the debts will be cleared. If the agreement fails later, the Supervisor can apply for a Bankruptcy Order.
The creditors may expect to do better out of an IVA than with the bankruptcy of the debtor, where they might well get nothing. For debtors, it is a chance to rebuild their lives. They retain control of their assets and can continue trading either as a sole trader or in a partnership or as a director of a limited liability and the restrictions that apply to bankruptcy are avoided. In most instances debtors are allowed to keep their homes and continue in business. Most important of all, once the agreement is made, interest ceases to accrue -this does not happen with a debt consolidation arrangement. Life can begin again!