The Individual Voluntary Arrangement
An individual voluntary arrangement (IVA) is an alternative to bankruptcy. It is a voluntary insolvency. A Licensed Insolvency Practitioner works to give IVA advice and help to the individual. It is a legal process that gives an individual struggling with their debts protection from creditors. Art the same time it provides creditors with a better return than Bankruptcy.
There are many reasons why individuals into serious debt. The IVA procedure enables the individual to put a proposal to his/her creditors for a composition in satisfaction of his/her debts or a scheme of arrangement of his/her affairs. A composition is an agreement under which creditors agree to accept a certain sum of money in settlement of the debts due to them.
The procedure is extremely flexible and the form which the voluntary arrangement takes will depend on the terms of the proposal agreed by the creditors.
How Long Does an Individual Voluntary Arrangement Last?
Typically an IVA lasts for between one to five years, during which time interest on debts is frozen and repayments are made to creditors from the realisation of assets or from contributions made out of earnings.
The agreement requires the approval of at least 75 percent in value of the creditors. Once approved it is legally binding on the individual and all his/her creditors.
Who can apply for an IVA?
- Private individuals and their spouse or partner can apply for an Individual Voluntary Arrangement
- Persons in business as sole traders can apply for an IVA and it may be possible to continue the business
- Directors of limited companies can apply for an IVA
- Certain professionals (such as solicitors or accountants) who are barred from practising as a bankrupt can enter into an IVA. However, the consent of their professional body is needed
In addition, a proposal for an IVA may be made by a debtor even if he/she is already subject to bankruptcy proceedings.
Some examples of recent IVAs we have worked on
We are experienced in handling Individual Voluntary Arrangements. Here are two recent case studies:
- IVA for North London based School Teacher
We were introduced to the debtor who is a school teacher by a professional friend who had worked with us previously.
The debtor had an interest in the matrimonial home which was in his name and that of his wife. He had accumulated credit card bills, and loans totalling some £45,000. As a result, he was unable to repay them after losing his job as a senior teacher.
After some discussion it was apparent that as he was approaching retirement age he could make a request from his school teacher pension fund for a monthly payment to be made for the benefit of his creditors.
The proposal was put to his creditors who recognised that they would not be able to access such funds in a bankruptcy. Therefore, they accepted these payments in full and final settlement of his debt.
As a result of this arrangement the creditors are due to receive approximately 50 pence in the pound. In addition the debtor will not be forced to sell the matrimonial home.
- IVA for an Individual based in Wiltshire
We were approached by the family of a retired gentleman who was in ill health. He had accumulated debts of over £60,000 and was unable to meet the repayments from his pension.
By the use of an Individual Voluntary Arrangement, creditors agreed to accept his savings of £10,000 in full and final settlement of all debts due, this gave creditors a slightly better outcome than if they had made him Bankrupt. This arrangement has now successfully completed. As a result, he is able to enjoy his retirement without the enormous debt burden.
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Contact us for Help and Advice on Individual Voluntary Arrangements
If you, or a client, are facing financial difficulties and believe that an Individual Voluntary Arrangement would help to pay some or all of your debts off over time, please contact us or call us on 0208 088 0633 for a FREE initial discussion.