Personal Insolvency & Individual Voluntary Arrangements
Our IVA specialists have experience, expertise and empathy in dealing with Individual Voluntary Arrangements. An IVA can enable an individual in financial difficulty to avoid personal bankruptcy and is particularly useful as it allows a tool to freeze and potentially reduce liabilities.
What is an IVA?
Individual voluntary arrangements or IVAs can help individuals, sole traders and business partnerships to avoid bankruptcy.
An IVA is a formal agreement with creditors to pay back debts over an agreed period of time. Creditors agree to them where they believe they will be paid more than if they make someone bankrupt (and a high proportion of IVA proposals are agreed).
The advantage to the individual or partners is that it is perceived as avoiding stigma and some of the difficulties of bankruptcy – an un-discharged bankrupt cannot be a director or take on credit without disclosing a bankruptcy.
To agree an IVA, you need to find a licensed Insolvency Practitioner - such as P&A – who will look at your finances, see if an IVA could be feasible and discuss the options of bankruptcy and IVAs. They should also provide you with a publication issued by R3, the Association of Business Recovery Professionals, “Is a Voluntary Arrangement right for me?”
The court has to approve an IVA proposal, a licensed Insolvency Practitioner (IP) has to oversee it and the IVA has to be approved by 75% of unsecured creditors by value.
The IP will produce what is effectively a contract to agree with your creditors, called Proposals. These Proposals will show a better return to creditors than would be achieved in a bankruptcy and may be based on:
- a contribution being made from a third party – such as from family and friends – and/or;
- payments from your future income or trading profits and/or;
- the sale of assets.
For example, you may have debts of £100,000 and can raise £50,000 net from any of the above options. The IP will propose that these funds are shared equally between your creditors, so that each creditor is paid 50p for every £1 they are owed, in full and final settlement of all your debts.
The IP – now called Nominee - attaches a report explaining why he considers the Proposals should be considered by creditors.
The IP contacts all your creditors and calls a meeting with 14 days’ notice and sends them the Proposals. At the meeting, more than 75% of creditors who choose to vote (in person or by proxy) need to vote in favour, with or without modifications.
Once an IVA has been agreed, the Nominee becomes the Supervisor of your IVA and ensures you deliver what you promised to your creditors. If you break any aspect of the agreement, then the Supervisor can make you bankrupt.