Individual Voluntary Arrangement (IVA)

An IVA is not necessarily the correct solution for your particular circumstances, though many debt advice agencies will "shoehorn" debtors into one at the first opportunity. Why? Because that is most profitable for THEM believe it or not. We do, it has to be admitted, have a "bee in our bonnet" about this issue, it being an ethical one. The last thing a debtor needs is to be SOLD a solution like an IVA if it's not the correct solution for a particular debt problem.

An IVA is no guarantee against bankruptcy - itself not a good situation to be in with its own repercussions.

That's not to say that an IVA is the WRONG solution, only that it is one of many solutions which we can advise on. For some, i.e. those with over £15,000 in debt and at least 4 creditors, an IVA can in fact be the best solution.

At the end of the day, we will advise debtors as to the options and leave the choice to them.

We'll also make a promise to you: "We'll never offer a solution to you based on the profit WE can make from it."

However, our advice for debts of £15,000 and over is that you consider an Individual Voluntary Arrangement (IVA) or if you live in Scotland, a Trust Deed.These are legal processes recently introduced as part of the Insolvency Act to afford individuals struggling with debt the opportunity to make a formal agreement with their creditors in order to clear their debts.

An IVA is a contract between debtors and creditors, the terms of which can be very flexible, though creditors will expect their prospects of recovering their money to be at least as good as in bankruptcy. They will also expect any proposal to contain sanctions, such as the right to bankrupt debtors if they do not fulfill their part of the contract. An Insolvency Practitioner (IP) is necessary for all stages, initially known as the Nominee (A Licensed Insolvency Practitioner, under the Consumer Credit act 1974), later as the Supervisor.

Method:

• A draft proposal from the debtor, is created setting out the debtor's financial position, assets and liabilities and proposals to deal with creditors. The Nominee assists the debtor with the drafting of the proposal to ensure that it complies with the requirements of the Insolvency Act 1986.
• Once complete an application for an Interim Order is made by lodging the documents with the Court having bankruptcy jurisdictions in respect of the debtor.
• The Interim Order is then issued, prohibiting commencement or continuation of any legal process against the debtor or his estate until the Nominee considers whether the proposal is realistic and workable.
• The Nominee files a report into Court indicating that in his opinion a creditors meeting should be called, if that is the case.
• All debtors and creditors are circulated with the proposal by the Nominee at the creditors meeting, where a vote is held to decide on whether or not to accept the proposal as it stands or after modification, modifications which debtors have the right to accept or not.
• The proposal must then be agreed to, by at least 75% per cent in terms of value, by those creditors who are present or represented at the meeting.

Once made, the decision is binding on all the creditors. The Supervisor appointed at the creditors meeting will then proceed to administrate the proposal and pay the creditors.

The Supervisor's role is to implement the Arrangement. The Supervisor will realise the assets of the debtor and make payment of dividends to the creditors in accordance with the proposal.

Plus points:

There are significant advantages of an IVA against bankruptcy.

• Debtors:
  • Have more say in how assets are dealt with
  • Have more say in how payments are made to creditors.
  • May be able to persuade creditors to allow the retention of certain assets (e.g. home, car).
• Restrictions on obtaining credit etc. which apply to a bankrupt are avoided
• Because some of the government fees and expenses which apply to bankruptcy do not need to be paid, the overall costs are likely to be less allowing you to pay more to your creditors.
• An Interim Order has the effect that, during the period for which it is in force:
  • No bankruptcy petition relating to the debtor may be presented or proceed with
  • No other proceedings, and no execution or other legal process, may be commenced or continued against the debtor or his property except with the leave of the Court.
• Up to 75% of the debt is legally written off.
• You're guaranteed to be debt free in 60 months.
• All interest and charges are frozen.
• Less hassle paying bills as there's just one monthly payment to be made.
• No further action (bailiffs, statements, reminders etc.) can be taken by your creditors.
• Debtors can offset some of your debt as bad debt relief.
• No restrictions on trading and on obtaining credit etc. which apply to bankruptcy

All creditors who were given notice of the creditors meeting and were entitled to vote at the meeting are bound by the decision of the meeting. Debtors naturally need to act responsibly and flexibly in order to reach agreement with creditors.

If you would like further advice on wether an IVA is right for you, enter your details below and we'll contact you. Our resident debt adviser, Wally Stone has over 20 years experience in finding the right debt solution for people in any situation. You can call him on 0845 466 0364 for advice on IVA's or other debt issues.