Individual Voluntary Arrangements. IVA
What is an IVA?
There is an alternative to bankruptcy called an “Individual Voluntary Arrangement” (IVA). This is a formal arrangement through the county court to pay an agreed amount off your debts over a shorter period. This usually means paying a high monthly instalment over 3 to 5 years. The rest of the debts are written off. Some IVAs are set up on the basis of using a lump sum to make offers to the creditors rather than make monthly payments. Some IVAs are a mixture of both.
Is an IVA suitable for me?
An IVA is not suitable for everyone. It is usually only worth looking at if you have a lot of money to spare every month to pay your creditors and/or you have a lump sum or assets that can be included.
What is the procedure for an IVA?
An IVA has to be set up by an insolvency practitioner (IP). An insolvency practitioner is usually an accountant or solicitor who is authorised to set up IVAs. Once an IP has agreed to make an IVA proposal for you, they can apply to the county court for an “Interim Order”.
This stops your creditors from starting bankruptcy proceedings against you. It also stops any other enforcement action without the court’s permission whilst the Interim Order is in force.
From 01/01/03 you can put forward an IVA proposal without applying for an Interim Order first. This may reduce your costs but means your creditors can still take enforcement action against you until the IVA is agreed.
You can ask for an IVA even after you have gone bankrupt. See the section on “Fast Track IVAs’. There are no rules on how much debt you have to be in before you can ask for an IVA.
The IP sends the IVA proposal to your creditors and arranges a formal meeting called a “Creditors Meeting”, giving the creditors at least 14 days notice. Check with your IP and make sure that all your creditors have been contacted. If creditors have no notice of the meeting they do not have to stick to the terms of the IVA and can pursue you for their debt separately.
At the meeting creditors have to vote on whether to accept the IVA. Often creditors send their vote to the IP and don’t actually come to the meeting. If 75% of your creditors “by value” who actually vote agree to the IVA, then the rest are bound by the IVA even if they voted against it or did not vote at all. “By value” means the creditors to whom you owe 75% worth of debt not the number of creditors you have.
So if the creditors to whom you owe the highest amount vote against the proposal then the IVA may not go through. Sometimes creditors will haggle about the terms of the IVA and ask you to agree to pay more every month or include assets you do not want to lose. They may ask you to make payments over a longer period.
Once the IVA is agreed your IP will supervise the arrangement and make sure you make the payments. If a creditor comes to light after the IVA has been agreed, they can claim the amount they would have received as if they had been included in the IVA at the start.
If the IVA does not go through then you are back to the same position as you were in before the Interim Order and you have to negotiate with your creditors separately. You have to wait 12 months before you can apply for another Interim Order.
How do I find an Insolvency Practitioner?
Your local county court may be able to give you a list of insolvency practitioners.You can also ask your local Official Receiver’s office for list. If you cannot find your local OfficialReceiver’s office contact The Insolvency Service Central Enquiry Line on 020 7291 6895.Check out the Yellow Pages or telephone directory.
WARNING: Be careful of companies who suggest they can put you in touch with an IP if you pay them a fee. These are known as “ambulance chasers”. You can contact an IP directly without going through another company.
A list of IP’s can also be obtained from:
The Association of Business Recovery Professionals
4th Floor Halton House
20-23 Holborn
London
EC1N 2JD
020 7831 6563
www.r3.org.uk
The Insolvency Practitioners Association
52 - 54 Gracechurch Street
London
EC3V 0EH
020 7623 5108
www.insolvency-practitioners.org.uk
The Insolvency Practitioners Policy Section
The Insolvency Service
PO Box 203
5th Floor
21 Bloomsbury Street
London
WC1B 3QW
020 7637 1110
www.insolvency.gov.uk
There is an Insolvency Service publication called “The Directory of Authorised Insolvency Practitioners”. This is kept in local reference libraries. It lists IPs by area and who regulates them. If they are not licensed then you should not use their services.We can also give you details of some IPs but are not in a position to actually recommend any companies listed.
Fees
All IPs will charge fees for setting up and supervising an IVA. It is very important that you shop around to make sure you are getting the best deal. Typical fees are over
