IVA - Individual Voluntary Arrangement

An IVA or Individual Voluntary Arrangement is a compromise reached between the debtor and their creditors to pay off outstanding debts and to avoid the consequences of bankruptcy. The process is supervised by a licensed Insolvency Practitioner, and once it comes into effect, it is legally binding to all parties concerned. What this means is that as long as the debtor complies with their obligations in the IVA, the creditors can not start proceedings to declare the debtor bankrupt or take any enforcement action against the debtor.

An IVA is available to individuals, sole traders and partners who are facing financial pressure and do not wish to face the consequences of losing their property and assets in the event of being declared bankrupt.

As part of the agreement, the debtor makes contributions to the creditors from disposable income over a designated period of time, which is usually five years. The arrangement is beneficial to both the debtor and the creditors, the debtor is able to pay his debts and continue with his business and the creditors can expect a larger repayment than could otherwise be expected were the debtor to be declared bankrupt.

How an IVA works

You have a discussion with an Insolvency Practitioner (IP) who ascertains your assets and liabilities and your current financial situation.

The IP then arranges the suspension of any legal action that the creditors might take while the IVA proposal is under consideration.

Based on the required information, the IP prepares a proposal detailing repayments for your approval.

The next step is to request a meeting with the creditors. The copy of the proposal is sent to the creditors a few weeks before the meeting so that they can consider whether or not to vote in favour of it.

At the meeting, the creditors can ask for modifications. A vote is then taken and those in favour and against are counted. If the creditors, representing 75% of the debt, vote in favour the IVA comes into effect.

The role of the IP now changes from helping you put a fair proposal to ensuring that you comply with the obligations in the IVA.

The IVA, once it comes into effect is legally binding. As long as you meet the terms and conditions until the specified period, you will be free from debt regardless of how much has been paid off.

During the period of the IVA, your financial situation will be reviewed regularly to see if there has been any change in your circumstances.

Qualifying criteria for an IVA

An IVA has some costs involved so to qualify for an IVA you must usually owe greater than £15000.

The amount should be spread between more than three separate creditors.

You should have a disposable income of £200 for monthly repayments.

For an IVA to come into force, creditors representing 75% of the total debt should agree to it.

The mediation of an Insolvency Practitioner is required for an IVA to become legally binding.

Unlike bankruptcy which can be forced upon you, an IVA is something that you enter into as a matter of choice. An IVA is certainly preferable to bankruptcy, but is it the right solution for you? We can advise you on how an IVA can help you with your debts, what is involved and how the process works.