An IVA is a way of dealing with your debts which is set up in law. It 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 employ an authorised insolvency practitioner to prepare the arrangement and act for you.
Insolvency practitioners are usually accountants or solicitors and their fees are similar to those charged by members of these professions for other kinds of work. Often you will have to pay start-up fees and these can be expensive.
You must apply to the court for an interim order. This prevents your creditors from presenting, or going ahead with, a bankruptcy petition against you. This is in force throughout the interim order.
The insolvency practitioner, as your nominee, will tell the court the details of your proposal. They will also say whether, in their 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 have had notice of the meeting must keep to 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, so, make them keep to it.
At the meeting, the creditors vote on whether to accept your proposals. Your proposal will be accepted if enough creditors (those who make up over 75% of your total debt) vote in favour.
The insolvency practitioner supervises the arrangement and pays the creditors in line with the accepted proposal.
Benefits over bankruptcy
An individual voluntary arrangement gives you more say than bankruptcy in how your assets are dealt with and how payments are made to your creditors. You may be able to persuade your creditors to allow you to keep certain assets (such as your home). You will not have to pay some of the fees and expenses which are charged in a bankruptcy. The overall costs are likely to be less too.
If you enter an IVA, but fail to give full details of your assets and debts or fail to do what you have agreed under the arrangement, the insolvency practitioner, or any creditor bound by the IVA, may still petition for your bankruptcy.
Much of this information comes from the Insolvency Services website. For more information on individual voluntary agreements, please visit www.insolvency.gov.uk
Please click the link to see the risk warnings for our debt plan.