This is a formal version of the voluntary arrangement . An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and you must be helped by an insolvency practitioner. Any agreement reached with your creditors will be binding on them.
How does it work?
- First, find an authorised insolvency practitioner prepared to act for you. (Your local court can give the names of local practitioners.) A list is also available for you to look at in your local Official Receiver’s office.
- Then you apply to the court for an "interim order". This prevents your creditors from presenting, or proceeding with, a bankruptcy petition against you while the interim order is in force. It also prevents them from taking other action against you during the same period without the permission of the court.
- The insolvency practitioner tells the court the details of your proposal and whether in his or her opinion a meeting of creditors should be called to consider it.
- If a meeting is to be held, the date of the meeting and details of the proposals are sent to your creditors. Only those creditors who had notice of the meeting are bound by the arrangement, so it is important that you have accurate records of all your creditors’ names and addresses. Otherwise, the arrangement might fail because the practitioner cannot contact all the creditors and, therefore, bind them to it.
- At the meeting, the creditors vote on whether to accept your proposals. If enough creditors (over 75% in value of the creditors present in person or by proxy, and voting on the resolution) vote in favour, the proposals are accepted. They are then binding on all creditors who had notice of, and were entitled to vote at, the meeting.
- The insolvency practitioner supervises the arrangement and pays the creditors in accordance with the accepted proposal.
What will an individual voluntary arrangement cost?
You should ask several practitioners what they charge before you ask any of them to act for you. Insolvency practitioners are usually accountants, some are solicitors and their fees are similar to those charged by members of these professions for other kinds of work.
Advantages
- Opportunity to write off a significant part of the debt
- Interest on the debt can be frozen
- Can repay over a period usually 60 months (but can extend to 72 months)
- Is a legal procedure and thus offers protection from creditors
- Creditors in the IVA must stop chasing the debt
- Is a descreet solution
- Can be in an IVA if you are a in positions where bankruptcy is difficult ie company director, police officer, Prison officer.
Disadvantages
- At the onset creditors have the right to vote against the propsal either failing the IVA or asking for an increase in contributions.
- Monthly payments must be met.
- Three missed payments (without IP authorisation) could result in a breach of the IVA. A certificate of non-compliance, termination or annual report will be issued. When this is done the IVA is "dead". This means you are back at square one and creditors will start to chase for the debt. If you choose to do nothing at this stage you could end up in a mess. Popular choices after this stage are bankruptcy, raising a lump sum to clear the debt or debt management.
- If the IVA is for 60 months and you are a home owner there is a possibility a year 4 clause is in place. This requires upto 100% of the equitable value to be realised in favour of the creditors
- Inrease in earning normally result in inreased IVA contributions. Overtime is normally 50% to creditors.
- Remortgage during the IVA period is not possible without the permission of the IP (Insolvency Practitioner).
- A windfall such as redundancy payment or Inheritence during the IVA period would have to be realised in favour of the creditors.
- If an IVA fails you are back at square one-Money paid in minus IP fees are paid to the creditors but they can chase for the remainder.
- If the IVA fails the creditords can vote to petition for your bankruptcy.
