Individual Voluntary Arrangement
An Individual Voluntary Arrangement (“IVA”) is an alternative process to bankruptcy.
If you are have unsecured debts and are unable to afford the repayments an IVA may be a solution.
An IVA must be set-up through a licensed insolvency practitioner and is a formal contract between a debtor and their unsecured creditors. An IVA will normally last for a period of five years during which the debtor undertakes to pay an affordable monthly sum to the practitioner who distributes this among the creditors. At least 75% in value of creditors who vote must agree to the proposal and, once agreed, it will bind all the creditors who had notice of the proposed IVA.
An IVA will be tailored to individual needs and circumstances. When H M Revenue and Customs is a creditor it is a prerequisite that all outstanding tax returns are submitted before they will give consideration to the proposal.
At the end of the IVA, provided the terms of the arrangement have been complied with, creditors will receive a final dividend and the balance of the debt will be written off.
- Brings to an end all recovery action from unsecured creditors that have had notice of the IVA.
- All parties who had notice of the IVA are bound by the terms of the proposal once accepted.
- The restrictions of bankruptcy do not apply.
- It may be possible to retain some assets, including your home.
- Costs are less than bankruptcy.
- Once the IVA is successfully completed, all remaining unsecured debts are written off.
- If a debtor fails to adhere to the terms of the proposal they will be made bankrupt.
- There will be a negative impact on an individual’s credit rating.
- Certain debts are not eligible for inclusion in an IVA.
- There is no guarantee that a proposal will be accepted.
- If a creditor has not had notice of the proposal then they will not be bound by it and may continue with recovery action.