Individual Voluntary
Arrangements (IVA)
Individual Voluntary Arrangements
An Individual Voluntary Arrangement (also known as an IVA) is an agreement in writing between an individual, called the debtor and their creditors. It is used as a solution to avoid bankruptcy.
The reason creditors will often accept and even prefer this option over bankruptcy is they should receive a better return upon completion.
Some considerations of an IVA
An Individual Voluntary Arrangement is usually beneficial to all for the following reasons:
- It avoids the stigma and credit rating reduction of a bankruptcy (although it still affects the debtor’s credit rating).
- If the debtor works in a regulated profession e.g. as an accountant or solicitor they should be able to keep their employment.
- They may be able to keep their home and other assets if needed for work.
- It can give a more organised sale of assets giving creditors a better return than bankruptcy.
- Once it is approved creditors have to deal with us and should not need to contact you for money.
A calculation always needs to be made to decide if an IVA is a better option than bankruptcy for all parties. When making that calculation the Insolvency Practitioner will help the debtor decide what assets they can offer to creditors. This may be from asset sales or ongoing income contributions over up to 5 years.
IVA step by step process
An overview of the different IVA stages and how we assist you throughout the entire process.
01. Meeting & options
We meet with you and discuss all of the possible options including the alternatives of bankruptcy or a debt management plan.
02. IVA Proposal
If an IVA is the right solution, we start to prepare the proposal. This is a lengthy document setting out your financial and business history, your current financial position and the offer you are making to your creditors. If you are running a business it will also include a cash flow showing your ability to make monthly payments.
03. Nominees Report
The Insolvency Practitioner (us) then writes a report called a Nominees Report giving an opinion on the merits of the proposal to creditors and whether it is fair to all parties. In the process of doing that we may ask for assets like your home to be professionally valued.
04. Document Approval
Once you approve the final proposal, a signed copy of this is sent to all of your creditors. You then have to wait.
05. Decision timeline
The IVA decision is then taken 14 days later and can be adjourned for up to 14 days. The decision to accept or reject the proposal is taken by creditors. At least 75% of creditors by value need to approve it for it to be accepted and legally binding.
06. Modifications / Approval
If creditors propose modifications the debtor must agree to them in writing or they will count as rejections. Once the final proposal is approved it is binding on all unsecured creditors even those that voted against it.
Once the IVA is approved it may last for a period of up to 5 years. The Insolvency Practitioner (now called a Supervisor of the IVA) must monitor the debtor’s compliance with the terms. An annual report will be sent to creditors, often with an annual dividend.
Failure to comply with the terms can lead to failure and bankruptcy. In some cases, the IVA may need to be modified, with creditors agreement, mid-way for example due to a fall in the debtor’s income.
If the process fails it is common for the Insolvency Practitioner to become the Trustee in Bankruptcy appointed to manage the debtor’s finances.
david@kirks.co.uk
Phone
0808 1961496
Offices
Across the South West, London & Wales
David Kirk
Kirks Insolvency
David qualified as a Chartered Accountant in 1990 and Licensed Insolvency Practitioner in 1996. David will give you clear and plain language advice about your business’s options and make a recommendation of which route he thinks will work best for you.
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“Very efficient and cost effective”
I have found Kirks Insolvency to be very reliable in terms of their dealings with us as their customers. They are clear in terms of the process and what it entails and are very prompt when it comes to communications. I would recommend their services.
Michale P
Business owner
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