IVA Debt help- The Government Approved Debt Solution

Some information on IVAs (Individual Voluntary Arrangements)

If you’re seriously in debt, it sometimes seems as if bankruptcy is the only answer. But that’s not necessarily the case. In fact, it may not even be the best option. It’s very much worth your while to consider an IVA – an Individual Voluntary Arrangement. This is something not everyone knows about, so here are some basic details.

What it is

An IVA – short for Individual Voluntary Arrangement – is a legally binding arrangement by which you reach a compromise with your creditors and avoid the consequences of bankruptcy. It offers the creditors a larger repayment of your debt than they could expect to get if you went bankrupt. Payments can be made from your income over a set period, and contributions can also come from a third party or some other source that wouldn’t normally be available to a Trustee in Bankruptcy.

Who can benefit

IVAs are particularly used by property-owners who want to avoid the possibility of losing their property if they go bankrupt. Also by sole traders and Partners who, while having problems with their business now, believe it will be profitable in the future. If it survives, they’ll be able to make a larger repayment to creditors than they could if they were made bankrupt and the business had to stop trading. But IVAs are worth considering by anyone suffering pressure from their creditors.

How it works

In theory, you – the debtor - draft proposals for paying off your debts, then instruct a Nominee, (who must be a Licensed Insolvency Practitioner), to review them before submitting them to the court and then to your creditors. In practice, it’s the Nominee who draws up the proposals based on the information you provide and submits these to court along with his or her comments on their merits.

In detail, these proposals consist of

A notice of the date and location of the creditors’ meeting.
A Statement of Affairs. This is essentially a list of your assets and liabilities.
A complete list of the creditors.
A schedule advising the creditors of the majority required to approve the IVA.
A guide to the fees charged by the Supervisor following approval.
A form of proxy for voting purposes.

The immediate aim is to get an Interim Order, which is an order made by the court which stops creditors from taking any action against you until they’ve met to decide whether the proposals are acceptable to them or not. If this is granted the proposals are circulated to the creditors. A creditors’ meeting then has to be held not earlier than 14 clear days later.

The purpose of this meeting is to agree or reject your proposals with or without modifications. (Modifications can be requested by creditors at the meeting.) Acceptance requires a vote of 75% in value from those creditors who vote either in person or by proxy at the meeting. This figure of 75% refers only to those who actually vote. Assuming the creditors have received notice of the proposals, they will all be bound by the terms of the arrangement whether they voted or not.

If the IVA is approved, a Supervisor is appointed (usually the Nominee) to ensure that the proposals are adhered to, and to distribute the dividends to the creditors.

And, assuming you comply with the terms of the arrangement, you’ll be fully discharged from all liabilities included within it, once it’s completed.

What makes a successful IVA work

The IVA has to offer a higher return to creditors than they could expect to get if you were to be made bankrupt.
And on your side, you have to make an absolutely honest declaration of your assets and/or anticipated future earnings.

Advantages of an IVA

If you’re a sole trader or partner an IVA enables you to continue to trade and generate income. You can use that towards repayment of your creditors, rather than having them call upon your personal assets.

There are no restrictions as regards personal credit. Though, obviously, in practice, it can prove difficult to obtain.

Since it’s you who’s drawing up the proposals, you can tailor them to your personal circumstances. The arrangement is completely flexible. So you might want to exclude your property from the IVA, assuming you’re able to satisfy your creditors that they’d do better out of this than they would if a bankruptcy order was made.

You don’t suffer the restrictions imposed by bankruptcy, such as not being able to act as a director of a limited company etc.

Advantages to creditors

Since the costs of administering an IVA are considerably lower than those of bankruptcy, the creditors get a higher return.

And since IVAs operate as an insolvency procedure, they can still reclaim tax and VAT relief as a bad debt.

Disadvantages of an IVA

Where contributions from income are being made, IVAs generally continue for a longer period than that of bankruptcy - commonly 5 years as opposed to 3. (This longer period is often required by creditors as a bargain for allowing you to avoid the consequences of bankruptcy.)

If you don’t comply with the terms of the arrangement, your home and assets can still be at risk if they haven’t been specifically excluded from the proposals.

If you don’t meet your repayment obligations, you are still liable to be made bankrupt.

From the creditors’ point of view, there is no opportunity for a Trustee in Bankruptcy to investigate your actions or look for hidden assets.

This is only a brief introductory guide. If you’re interested in finding out more about IVAs, go to http://www.ivafreehelp.co.uk