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IVA Basics

1. A proposal is created for creditors offering to repay fixed monthly amounts, or delay repayment until a fixed later date.

2. Individual Voluntary Arrangements are subject to stringent and complex legal requirements therefore an Insolvency Practitioner (IP) is usually appointed to support and represent you.

3. Your IP needs to see your accounts and a full disclosure of your income, assets and debts to allow them to create a realistic proposal with you.

4. Once the proposal is established, your IP has 14 days to make a recommendation to the court on your suitability.

5. Your IP usually presents your proposal to creditors during the ‘Creditors Meeting’ phase.

In the meantime, any creditor petitioning for you to be declared bankrupt will be automatically sent copies of all relevant documents. An IVA comes into force when formally agreed at the Creditor’s Meeting. Usually, your IP works with you to manage the administration and distributes payments among creditors (often including a proportion for their own fees) until the agreement ends after 5 or more years.

What does the IVA Proposal Contain?

Proposals for Individual Voluntary Arrangements must include –

1. The name of the ‘nominee’- this is the ‘administrator’ and ‘negotiator’, hence usually the IP, or at least another person belonging to a suitable professional body

2. Details all the money owed

3. Details of each creditor

4. A summary of the applicants income

5. Details of any assets

6. A realistic, carefully constructed payment plan

7. Details of background on why the applicant desires the arrangement

8. Some rationale by which your creditor’s best interests are served in accepting the proposal, such as advantages to them over bankruptcy and a workable payment plan

The Meeting

Details are sent to all creditors; if it is a face to face meeting, your IP or one of their authorised representatives will be the ‘Chair’. Changes to your proposal by creditors can only be made with your agreement. Once enough creditors (to represent 75% of the value of what you owe) agree to the proposal, the others are legally bound by the agreement whether they are in favour or not. Documentation of the outcome of the meeting is sent to the court and the Official Receiver (plus any Trustees). IP’s have to register details of all Individual Voluntary Arrangements with the office of the Secretary of State at the Insolvency Practitioners Unit in Birmingham.

Preventing Bankruptcy

In some cases, you may apply to a court for a hearing for an Interim Order. These orders halt local papers from publishing bankruptcy petition details and sometimes suspend the entire bankruptcy proceedings. It is worth noting the Official Receiver can apply for an Interim Order on behalf of people incapacitated on the grounds of physical or mental health. Regardless of circumstance though, the Official Receiver is still obliged to secure any assets and no other legal bankruptcy restrictions are lifted.

The Official Receiver makes a brief court report including any offences, previous bankruptcies, lack of compliance with statutory duties, income and assets, known debts and their own likely fees and costs. They discuss any other factors likely to affect your creditor’s decision about your proposal, such as non-disclosure of relevant information, known sales of assets below their value or any other inadvisable financial activity. Often the court hears the IP’s report in the same session and in every case the Official Receiver draws the IP’s attention to any discrepancies between their two reports.

Interim Orders commonly apply until the day of the Creditors Meeting. At least 48 hrs before the order expires, the IP recommends to the court that the meeting go ahead, unless compelling reasons to postpone or cancel it have emerged, for which they must provide acceptable evidence. Interim Orders can be extended but there must be some end point to the process.

Petitioning for Bankruptcy? Bankrupt Already?

If you are applying to enter bankruptcy you should be informed by the Official Receiver’s office about Individual Voluntary Arrangements, to allow you to make an informed decision in your best interests. If you are already bankrupt but not discharged, copies of all documents for any IVA application must be sent to the Official Receiver and any Trustees.

Should your proposal be rejected at the Creditor’s Meeting, The Official Receiver informs you by letter and you would still be bound by bankruptcy law. Should it be accepted instead, your IP can apply to annul your bankruptcy order 28 days later.

When approaching any aspect of Individual Voluntary Agreements, you can always call our team of impartial, independent expert advisors or apply online for free advice.

We deal with all of the common legal solutions to debt problems and can give you quality debt advice that helps you explore all options available to you.