Individual Voluntary Arrangements (IVA)

What is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) is an agreement between you and your creditors whereby you make funds available for distribution between the creditors bound by the agreement. This usually involves making one monthly payment out of your income for a set period of time and, if you have any assets such as equity in your property, endowment policies etc you may have to make some of this available to creditors as well.

Applying for an Individual Voluntary Arrangement?

If you are unable to pay your debts as they fall due you may apply for an Individual Voluntary Arrangement. This applies even if you have assets that, if sold, would cover your debts. If you are already subject to a Bankruptcy Order you may still apply. If the arrangement is approved, your Bankruptcy is annulled.

What are the benefits of an IVA?

• Interest and charges on your debts are frozen
• Creditors stop ringing and writing to you - they contact the Supervisor of the IVA
• Once your obligations under the IVA are fulfilled, your debts are then written off
• You potentially avoid bankruptcy
• Your credit rating is not as seriously affected as in bankruptcy
• You can continue to trade

An IVA is an alternative to bankruptcy. Basically it is a contract between you and your creditors. The terms of your proposal to creditors may be very flexible, but creditors will reasonably expect their prospects of recovering money to be at least as good as in a bankruptcy. Further, they will expect the proposal to contain sanctions (such as a right to bankrupt you) if you do not fulfil your part of the bargain.

Your insolvency practitioner is likely to help you with your proposal to creditors and, initially, he is known as your ‘nominee’. If the creditors accept your proposal, an insolvency practitioner then becomes the ‘supervisor’ of the arrangement.

Your proposal will be voted on by your creditors at a creditors’ meeting (except in the case of the ‘fast-track’ procedure mentioned later). Generally, if over 75% by value of your creditors who are represented at the meeting (in person or by proxy) vote in favour, the IVA will be implemented. Creditors may put forward changes to the proposal, but they cannot impose them on you – you can decide whether or not to accept them.

You are not legally required to attend the creditors’ meeting, but in practice you should be there. Otherwise it will be impossible to agree any changes to the proposal. If last-minute changes are proposed, you should feel free to ask for reasonable time to think about them. If necessary, seek your insolvency practitioner ’s private advice outside the meeting about what is being proposed.

An IVA gives you an opportunity to avoid bankruptcy. If it is not approved, a creditor may bankrupt you. It follows that you should put forward the best offer you can to your creditors. Be completely open and honest with your insolvency practitioner and the creditors about your financial circumstances.

In an IVA, what are the insolvency practitioner ’s responsibilities to me?

The insolvency practitioner ’s role changes as the case goes on. Right now, before you have committed yourself to anything, he is your professional adviser, with responsibilities only to you. It is up to him to help you make the right decision about what to do, and, if you proceed with an IVA, to help you put your proposal to your creditors.

When you decide to go ahead, the insolvency practitioner becomes the ‘nominee’. At this point the insolvency practitioner ’s role changes and he has legal duties to the court which may conflict with your interests. For example, if he thinks your proposals are not fit to put before a creditors’ meeting, he is obliged to say this to the court, and the court may end the IVA procedure at that stage.

If the IVA is approved, the insolvency practitioner ’s role changes again. He is then the ‘supervisor’ of the IVA, and his responsibilities are mainly governed by the terms of the arrangement, but he still has responsibilities to the court. His position now is to be ‘honest broker’ – to act even-handedly between you and your creditors and to ensure that the terms of the proposal are fulfilled. If the proposal requires him to bankrupt you if you fail to deliver your part of the bargain – and creditors will probably insist on such a term – then that is what the supervisor must do.

So it is important that you understand how the insolvency practitioner ’s role changes as the case goes on. Don’t be afraid to ask questions if you want clarification.

If you are dissatisfied, your insolvency practitioner or his firm should have a formal procedure for resolving complaints. You should ask for details of this procedure and, first, raise the matter with the insolvency practitioner or his firm. Many complaints arise simply because of misunderstandings, and can be resolved by both parties taking the time to go through the problem. But if the matter cannot be resolved in this way, you can raise it with your insolvency practitioner ’s regulator (he must tell you who this is – there is a list at the end of this leaflet). His regulator will then investigate the complaint on your behalf. The Insolvency Service, a government agency, has a leaflet called ‘How to make a complaint against an insolvency practitioner’.

You also have a right to raise any complaint about your supervisor with the court, and the court may change any decision he has made. You should seek independent advice before going to court, as the court may order you to pay costs if it does not agree with your complaint.

Individual Voluntary Arrangements Procedure Guide

1. Choose an appropriate adviser (Nominee) to act on your behalf.
2. Consider with Nominee the terms of your Proposal to creditors and whether an Interim Order is required to stop any legal action already being taken against you by creditors. (If required steps 3 to 6 are followed, otherwise move to step 7).
3. Nominee will assist in writing your Proposal and make an initial application to court for an Interim Order protecting you from creditors.
4. Court will usually grant a 14 day interim order, and adjourn the full application to allow time for the Nominee to file his report and comments on your Proposal.
5. Nominee files your final Proposal including Estimated Outcome Statement and confirms to court that in his opinion a meeting of creditors should be summoned to consider your Proposal.
6. Court will then normally make a standard order summoning a meeting of creditors and adjourning any further action against you until all creditors have had an opportunity to consider your Proposal for an IVA.
7. In the majority of cases no Interim Order is required and the Nominee simply files your Proposal plus his Report and Comments at the Court. At the same time he will write to all your creditors advising them of your circumstances and giving them at least 14 day's notice of a meeting of creditors at which they will decide whether to accept or reject your Proposal.
8. At the creditors' meeting you need to have 75% of those creditors voting (by value of debt) agree to your offer for the IVA to be approved. If approved, the decision binds all creditors to the Arrangement including those that didn't vote or voted against.
9. The Nominee will then issue a Report to all creditors and the Court advising them on the outcome of the Meeting.
10. The Nominee's role now changes to Supervisor and all future correspondence from creditors is directed to his office. The Supervisor is then responsible for ensuring the terms of the Arrangement are adhered to by all parties.

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