INTRODUCTION

An I.V.A (Individual Voluntary Arrangement) is a formal procedure under the Provisions of the Insolvency Act 1986.  This legislation allows individuals, sole traders or partnerships with financial difficulties to avoid bankruptcy and gives protection from pending distraints, executions and other legal process by proposing, then agreeing a settlement with their creditors.
 
WHO CAN APPLY FOR AN I.V.A.?

The legislation requires that the individual must recognise the fact that they are insolvent.  In essence the individual cannot pay their debts as they fall due, and therefore are in a position to file for his or her own bankruptcy, pending bankruptcy procedures or already in bankruptcy, and wishes an annulment of the bankruptcy.

HOW DOES AN I.V.A. WORK?

An I.V.A allows an individual to avoid bankruptcy and the constraints referred to above, essentially by "doing a deal" with creditors.  The procedure is administrated under the jurisdiction of the Court, which means that if creditors agree to the "deal", the individual has protection of the court from creditor actions.

The word "deal" has been specifically chosen because the proposal does not have to follow any specific format as each individual's circumstances are different.  This can include an orderly and consented sale of part or all of the individual's assets, whilst setting an agreement not to sell other assets.  It can include a proposal to continue trading to allow money from future income to be set aside to pay off old creditors.  Furthermore the amount required for the deal is also flexible i.e. there is no need to repay creditors a 100p dividend in the Pound if you cannot afford to do so.  Often creditors may agree to accept proposals of a much less dividend in the Pound, meaning a large percentage of the balance of these claims which cannot be paid is subsequently written off.

Once the deal has been formulated, it will then be presented to creditors for their perusal.

For the I.V.A to be approved, a majority of creditors must vote in favour to accept.  The majority required is 75% by value of the debts of those creditors who vote at the meeting.  Creditors can vote personally on the day or by proxy from beforehand, and only unsecured creditors have a vote.

If those creditors, who do vote, accept the arrangement, then all of the individual's creditors are bound by that decision, whether they themselves voted against it or did not vote at all, e.g.  if the individual has twenty creditors owed £10,000 in total, and only one creditor owed £100 voted to accept the proposals via a proxy form, the I.V.A would be approved.  This is because 100% of those who voted had accepted and all twenty creditors would therefore be bound by the procedure.

THE INTERIM ORDER

The whole procedure can take up to 8 weeks to implement, which would leave the debtor open to legal actions, bailiffs etc...

In order to prevent such difficulties that could, in theory threaten the possibility of an I.V.A, we apply to the debtor's local County Court for what is known as an "interim order".  The interim order is effectively an injunction protecting the debtor from virtually all legal actions pending or actually in progress and even freezes a bankruptcy petition!

Depending on the information we receive from the debtor, we can obtain an interim order within seven working days of our appointment, meaning that time is truly the essence to thwart aggressive or non responsive creditors.  The interim order covers the debtor right up until the day of the creditors' meeting.

POST CREDITORS MEETING

Upon acceptance of the I.V.A the supervisor of the arrangement will contact the debtor and make arrangements for collection of the monthly payment by either standing order, or by paying in book - supplied by the supervisor.

WHAT HAPPENS IF THE I.V.A. IS REJECTED?

In the event of the above happening, our experienced consultants will advise you on alternate measures which may include bankruptcy.  However, please note that if you are forced into bankruptcy, you have mitigation value in the fact that you tried to offer the creditors a settlement and it is upon their head that they will receive little or no monies.  The official receiver may also look upon your case with more sympathy.

WHAT NEXT?