An Individual Voluntary Arrangement allows a debtor to repay what they owe for as little as 25 per cent of the original balances in a binding plan in which the creditors eliminate interest.

The IVA was established by the Insolvency Act 1986 and constitutes a formal repayment proposal presented to a debtors unsecured creditors via a Insolvency Practitioner. The proposal is presented to the debtors unsecured creditors versus the debtor opting to petition for bankruptcy.

Creditors (normally) take a commercial decision at a creditors’ meeting called to consider the IVA proposal and vote on a poundage basis. To be approved it requires a majority of 75% of those voting - where connected parties (such as family) vote, then of those voting in favour, >50% must be unconnected.

In the UK, an increasing number of consumer debtors with overwhelming levels of debt are turning to specialist debt advice organisations like Myvesta that offer protection from bankruptcy via the use of an Individual Voluntary Arrangement. Many debtors are also opting to move away from a traditional Debt Management Plan as a way of achieving resolution from debt problems as they do not offer a binding agreement upon thier creditors.

It is normally advantageous to set up an Individual Voluntary Arrangement before becoming bankrupt but you can propose one afterwards; if an Arrangement is approved post-bankruptcy then the debtor can apply to the Court for an annullment of the bankruptcy order.

If an IVA is proposed after bankruptcy, it is possible to nominate the Official Receiver to be the supervisor of the arrangement.

To setup an IVA you can contact Myvesta.

IVA Pros and Cons

IVA Pros

• The debtor knows that they will be out of debt in five yers or less. The repayment plan is not open-ended like a Debt Management Plan is.
• There isn’t the stigma or publicity that accompanies bankruptcy.
• A business can continue to trade and generate income.
• The debtor, via the insolvency practitioner, is involved in the choice of assets made available to the creditors since the arrangement is designed to suit the debtor’s situation. All this is providing the creditors are no worse off than if bankruptcy had taken place.
• Administration costs should be lower than bankruptcy, enabling higher payments for creditors.
• Creditors can still claim tax relief against bad debts just as with bankruptcy.
• Creditors who vote against the IVA are still bound by it as long as 75% of the creditors in terms of the amount owed agree to it.
• Creditors likely to recognise that they must accept less than all the money owed.
• The debtor does not suffer from the same restrictions as those imposed on bankrupts. For example, a debtor can still be a company director, in the armed forces, hold public office, retain their professional status or trade under a business name.
• The debtor is able to operate a normal current account, as long as it does not have an overdraft facility.
• Unlike a Debt Management Plan, an IVA is a binding agreement between the consumer and the creditor. This prevents the creditor from changing the terms latter on during the repayment period.
• IVA monthly payments are often very affordable. See the IVA payment calculator for an example.

IVA Cons

• The home and assets of the debtor can still be at risk if the creditors decide not to exclude them.
• Should the IVA fail, the debtor can still be made bankrupt. If this happens, the costs of the IVA will be added to the debts.
• All IVAs are recorded in the DTI register and will almost automatically appear on your credit file. This could affect any future applications for credit.

IVA Procedure

Completing an IVA is a relatively simple affair. The amount of time it takes is primarily dependent on two factors, the consumer and the creditors.

The IVA process is broken down in steps below:

1. Consumer identifies preferred IVA provider like Myvesta. This can become overwhelming since there are many IVA providers available.
2. Once you have identified the preferred IVA provider you are comfortable working with, and you are feeling some pressure to get a solution in place as quickly as possible, then provide the necessary information to your preferred IVA provider as quickly as possible.
3. Required IVA documentation will be gathered.
4. The written IVA plan will be written and supporting documentation gathered for a professional presentation and fair offer to your creditors.
5. The preferred IVA provider will contact your creditors and submit a Nominees Report that outlines for the creditors the merits of the IVA offer presented.
6. If there is a pressing or urgent debt situation that need immediate intervention then an Interim Order will be submitted to the court to provide immediate legal protection while the IVA is finalized by your preferred IVA provider.
7. A meeting of your creditors is scheduled by your preferred IVA provider. Technically it is called a meeting but in reality creditors rarely if ever show up. The major creditors vote by proxy through their assigned representatives.
8. Once the appropriate voting percentage of creditors accept the plan then the IVA repayment plan becomes binding on all your creditors, even those that did not vote in favour of the plan, and your creditors will no longer trouble you.

• no creditor can try and make the person bankruptcy;
• no landlord may exercise any right of forfeiture by peacable re-entry;
• no court proceedings or other enforcement action (including levy of distress) may be commenced or continued against the person or his/her property without the permission of the court.

To be insovent means to have the insufficiency or inability to discharge all debts of the owner.

One is considered insolvent when their assets are less than their liabilities.

To be insovent means to have the insufficiency or inability to discharge all debts of the owner.

One is considered insolvent when their assets are less than their liabilities.

The Law in England and Wales relating to bankruptcy is different to that in Scotland and Northern Ireland.

What the Insolvency Service Does

They:

• administer and investigate the affairs of bankrupts, of companies and partnerships wound up by the court, and establish why they became insolvent;
• act as trustee/liquidator where no private sector insolvency practitioner is appointed;
• act as nominee and supervisor in fast-track individual voluntary arrangements;
• take forward reports of bankrupts‚Äô and directors‚Äô misconduct;
• deal with the disqualification of unfit directors in all corporate failures;
• deal with bankruptcy restrictions orders and undertakings;
• authorise and regulate the insolvency profession;
• assess and pay statutory entitlement to redundancy payments when an employer cannot or will not pay its employees;
• provide banking and investment services for bankruptcy and liquidation estate funds;
• advise DTI ministers and other government departments and agencies on insolvency, redundancy and related issues; and
• provide information to the public on insolvency and redundancy matters via our website, publications, Central Enquiry Line and Redundancy Payments Helpline.

Insolvency Service Online Services

• File for Bankruptcy Online
• Find an Official Receiver
• Search the Insolvency Register
• Find an Insolvency Practitioner
• Make a Complaint About the Insolvency Service
• Search the list of Companies in Liquidation
• Search the list of Bankruptcy Restriction Orders
• Bankruptcy Restriction Orders - Latest Updates