What Is An Individual Voluntary Arrangement (IVA)?
An IVA is a less formal procedure open to insolvent individuals (even those who are already subject to bankruptcy proceedings). The IVA procedure is extremely flexible and varies from case to case. An IVA is basically an agreement with creditors to offer a better return than in bankruptcy and to therefore avoid the consequences of bankruptcy.
The process includes the individual putting forward a ‘proposal’ to creditors. In most cases this includes a promise to pay a certain monthly amount to the Supervisor of the arrangement, usually over 5 years. Where the individual owns property or other assets, these will be considered, and may be included in the arrangement. The proposal will result in a planned return to creditors of a certain pence in the pound (i.e. Xp in the £).
In an IVA, this return should be higher than under bankruptcy proceedings. There are often many reasons for an individual to wish to avoid bankruptcy, and an IVA can often help achieve this - therefore being beneficial to both the creditors and the individual.
The arrangement, if approved by the creditors at a meeting, is overseen by a supervising licensed insolvency practitioner. It is binding on those creditors who had notice of and were entitled to vote at the meeting. It is also binding on the individual, who much comply with the terms of the proposal. If not, the arrangement will fail, and creditors can then resume their enforcement of their debts.
An IVA cannot affect the rights of secured creditors or preferential creditors except with their agreement.
The IVA’s benefit is its flexibility and comparatively cheap administration costs for creditors, thereby increasing returns to creditors. IVAs also enable individuals to go about their daily business in a less restricted manner than under bankruptcy. At the end of the IVA (if concluded successfully), the remainder of any debts are written off.
Informal Arrangements With Creditors
Sometimes it is possible to negotiate an informal arrangement with creditors and avoid any formal insolvency procedure. This can include negotiations with creditors, and help in setting up time to pay plans with HMRC.
Contact our team for more information.
Debt Management Plans (DMP)
A DMP is an agreement with creditors to pay set monthly amounts, creditors will often agree to freeze interest payment. We do not ourselves set up debt management plans, however where this is an appropriate solution we have great contacts with businesses who can. |
