An Individual Voluntary Arrangement (IVA) is a statutory personal insolvency solution which allows a debtor to come to an arrangement with creditors to pay their debts in full or in part over time under the supervision of a licensed Insolvency Practitioner (‘IP’).
The IVA process requires a proposal, or offer document, to be drafted and sent to creditors. Debtors will normally consult an insolvency practitioner who becomes the intended ‘nominee’ and assists with the drafting of the formal proposal to creditors. In some cases where protection from legal proceedings is required the Court will be involved in the process of setting up an IVA but usually that will not be necessary.
The nominee will prepare a report to the debtor’s creditors (and the court if involved) as to whether the proposal is likely to be acceptable and viable.If appropriate, the nominee will then convene a creditors’ meeting and the debtor’s proposals will be considered by creditors. If the proposal is accepted at the meeting, which it may be with modifications put forward by creditors, the nominee will become supervisor of the IVA and oversee its implementation. Any agreement reached with the creditors will be legally binding. A majority of 75% of creditors by value of those creditors who actually vote is required to approve an IVA and any modifications proposed.
A voluntary arrangement with creditors offers flexibility for both debtors and creditors alike and is particularly useful for debtors who are self-employed, running businesses and also professionals. It may include assets not normally available in bankruptcy, for example, the use of third party funds or income from the debtor’s continued trading or employment. It gives the debtor more say in how his/her assets are dealt with, for instance, creditors may allow the debtor to exclude and retain certain assets such as his/her home.
When to consider Individual Voluntary Arrangements (IVA)
An IVA can be for individuals, unincorporated businesses, sole traders, directors or professionals who have assets or an income which will allow them to make an asset based offer and/or payments, at an agreed level, to creditors.
It is a particularly appropriate option for a person who does not want the stigma and professional consequences of bankruptcy, such as restrictions on acting as a company director or the suspension of a solicitor’s practising certificate.
SKSi has the knowledge and expertise to provide full support across the three stages of an IVA: advice, nominee and supervisor.
After evaluating and discussing your financial situation (including reviewing assets, debts, income and expenditure) our insolvency practitioner will determine an affordable contribution level and timeframe within which repayments should be made (generally around 5 years).
We will produce a formal proposal to be submitted to the creditors which they will consider and vote on at their creditors meeting, to be held within a few weeks. The proposal will:
- explain why the debtor considers that the voluntary arrangement is desirable;
- give reasons why creditors may be expected to concur with the arrangement; and
- provide details of the debtor’s assets and liabilities.
As nominee we will prepare a report on the proposal, chair the meeting of creditors and report on the result of the meeting.
Where a creditors’ meeting approves the proposal it takes effect from the date of the meeting and binds every person who had notice of it and was entitled to vote, whether they were present or not, or would have been entitled to vote if they had had notice of the meeting.
Once approved, the Supervisor ensures that the IVA is implemented as approved, will report on progress and make distributions to creditors from time to time. Details of the IVA must be entered on the Individual Insolvency register maintained by the Secretary of State.