IVA (Individual Voluntary Arrangement) procedure,
introduced with the Insolvency Act 1986, is
a flexible procedure for insolvent individuals,
and can be a useful alternative to bankruptcy.
debtor may formulate proposals to his or her
creditors, normally with the assistance of an
Insolvency Practitioner who is appointed Nominee
by the debtor. The debtor sets out his or her
circumstances, income and expenditure, assets
and liabilities, and the manner in which it
is proposed to deal with creditors. Typically,
partial payment of liabilities over a five year
period is proposed.
If required the
debtor can be protected from creditor enforcement
action whilst proposals are being formulated.
The Nominee files in Court a report on the proposal,
stating whether the proposals are considered
to be realistic and in the interests of all
parties concerned. The Nominee then sends the
proposals to creditors and invites them to a
Creditors Meeting.The creditors may accept or
reject the proposals, or negotiate amendments
with the debtor. The debtor must convince his
creditors that the proposed outcome will be
more favourable to them than the alternatives
of seizing assets or making him bankrupt.
At the Creditors Meeting the creditors vote
on whether to accept or reject the debtor's
proposals, which may be modified by agreement.
For the proposed Arrangement to be accepted,
75% of voting creditors by value must be in
The Nominee is normally appointed Supervisor
of the IVA, with duties from then on to ensure
that the terms of the proposals are complied
with, to distribute funds to creditors, and
to report periodically on progress.
Supervisor will declare the Arrangement a success
when all of its terms have been complied with.
In the event of failure, the Supervisor is often
obliged to petition the Court for bankruptcy
of the debtor subject to availability of cash
with which to fund petitioning costs.
This information is written in general terms
and cannot be fully comprehensive. Its application
to particular circumstances will depend on specific
facts. The views and suggestions set out are
not intended to constitute professional advice
or to be a substitute for specific advice.