(Individual Voluntary Arrangement)
An Individual Voluntary Arrangement (IVA) is a formal agreement between an individual and their creditors to repay all or part of their debts.
What You Need To Know
What Is An IVA?
- A bespoke, legally binding agreement an individual makes with their Creditors.
- Suitable for Sole Traders, Directors with Personal Guarantee issues and individuals with Credit Card/Bank debt.
- Introduced by the Insolvency Act 1986.
- Must be “Supervised” by a Licensed Insolvency Practitioner.
- May involve making monthly affordable repayments to the Supervisor over a five year period, the realisation of an asset or a lump sum payment from a third party.
- The Insolvency Practitioner writes to all the unsecured creditors with the individuals proposal.
- An estimate is provided showing the likely outcome if the individual were to be made bankrupt.
- The proposal may offer to repay creditors only a percentage of what they are owed with the balance being written off.
- A decision procedure is then set, with creditors having the option to accept, reject or modify the proposal.
- The proposal must be accepted by 75% in value of those unsecured creditors who vote.
- Once accepted, the IVA is legally binding on all creditors including those who did not vote or voted to reject the proposal.
The Small Print
What Are The Advantages Of IVA?
- A proportion of the individual’s debts are written off and no interest is payable.
- An individual can seek to exclude certain assets, such as their matrimonial home.
- Protection from further legal action once the scheme is approved.
- It includes both personal debts and business debts, as well as, for example, future debts due under finance agreements and shortfalls on properties.
- Court protection can be obtained from the outset, if necessary, by obtaining an Interim Order.
- Rather than making monthly payments over, say, 5 years it may be preferable to offer a one off payment, possibly from a third party.
- Lower costs and better returns to Creditors than Bankruptcy.
- No restrictions on the individual’s activities and not advertised, unlike in Bankruptcy.
- Even after being made bankrupt it is possible to put forward a proposal for an IVA.
- The terms can be varied, with creditor approval, if there is a change of the individual’s circumstances.
What Are The Disadvantages Of IVA?
- If payments are missed the IVA may fail which could lead to Bankruptcy.
- Creditors may seek to impose onerous modifications to the original proposal, such as increasing a monthly contribution amount.
- The Insolvency Service maintain a Register of Voluntary Arrangements which is accessed by credit reference agencies.
- The duration of the IVA may exceed the period the individual would otherwise have been bankrupt.
- Additionally, certain debts cannot be included, such as secured debts, child maintenance, student loans and fines.
Let's Take The
Next Steps Together
DSi provides expert advice to businesses and individuals encountering financial difficulty. We are a friendly yet professional firm, offering a spectrum of financial solutions to insolvency.
Our experienced team are here to help and do understand that financial problems can be extremely stressful. Our aim is to guide you through this giving straight forward and honest advice.
If you would like to discuss any aspect of personal insolvency please don’t hesitate to contact DSi Business Recovery to arrange a Free and Confidential meeting on 01924 790880
Get in Touch