Setting up an IVA

The Individual Voluntary Arrangement, or IVA, was brought in by the 1986 Insolvency Act as an option for bankruptcy, which is in the favour of both the creditors and the debtors. An IVA company enables the debtors with financial difficulties to come to a mutual agreement with the creditors, rather than having to file for bankruptcy. Through an IVA, those who are facing serious debt problems are able to avoid bankruptcy, and at the same time make a fresh start. Those who are considering setting up an IVA must contact a licensed insolvency practitioner, who will help in outlining the proposal for debt repayment, clearly demonstrating how it will benefit the creditors and showing what assets and funds are available to them. After that, the debtors can apply in the court for the interim order, which means that if this order gets granted, then creditors will not be able to file a petition for bankruptcy. A creditors’ meeting is held where the creditors decide whether they will or will not accept the debtor’s proposal. If more than 75% by value of the creditors accept the proposal, then the assets go in charge of the insolvency practitioner, who then administers them for creditors complying with the conditions of the proposal.

When filing for an IVA, the debtors are required to state the details including the comments of the nominee on the proposal, a list of all the assets of the debtor in a statement of the affairs, a complete listing of all the creditors, a guide to the charged fees by the supervisor and a proxy form. An IVA proposal with higher returns for the creditors is more likely to be accepted and be successful.
Setting up an IVA does affect a debtor’s credit rating for six years from acceptance of the IVA, however a successfully completed IVA may be viewed favourably by future creditors. Until an IVA has run its course, the debtor is unable to apply for any other credit card or loan without the approval of the insolvency practitioner supervising the case.

Nobody wants to be made bankrupt, and an IVA provides the debtors with a way to avoid it. Moreover, the procedure of setting up an IVA is quite simple and that is why it is becoming a more preferred option. At the same time, the debtors are able to hold public offices, live their regular life and earn an income for repaying their debts.