Individual Voluntary Arrangements (IVA)
An Individual Voluntary Arrangement (IVA) is a government approved scheme according to which you can make a formal proposal for payment of your debts to your creditors through the mediation of an Insolvency Practitioner (IP). Insolvency Practitioner who will act as “Nominee” until the IVA is formally approved. Once it is approved he will remain as “Supervisor” for the remaining term of the IVA.
An IVA enables you to renegotiate your debt with your creditors so that you do not have to declare bankruptcy. As a part of the process, the IP arranges a meeting between the borrower and the creditors to reduce the amount of the loan that has to be repaid. Once the new terms are agreed upon, you would be required to pay back the amount in instalments, lump sum or a combination of the two. Your creditors also have to accept the negotiated amount as full and final settlement of the claim.
The IVA questions settlement document is beneficial to both the debtor and the creditors. Your creditors stand to gain from this arrangement because instead of losing all their money, they would get back at least some amount. Secondly, they are also spared the fees and other expenses they would have to incur if they proceed with a bankruptcy case against you. Having said this, it is also important to point out that the creditors are not bound to accept your proposal. For an IVA to come into effect, 75% by value of your creditors have to agree to the proposal.
Advantages of an IVA
If you are a sole trader and you feel that your business has great potential, you can save it by opting for an IVA. However, you can not secure your business if you declare bankruptcy.
As already stated that an IVA has legal backing and so once it comes into effect, your creditors can not charge you with bankruptcy proceedings during the IVA cost term period unless you violate the terms and conditions of the agreement.
The term period of your IVA is tailored to your circumstances. You can extend the loan repayment period to five years.
Your IVA will take into account your valuable assets such as equity in property, savings, shares or cars. However, you can work out a more favourable arrangement that you could not in case of bankruptcy, to retain assets such as your house.
Unlike bankruptcy, IVA is not reported in local legal notices. Therefore it carries less stigma than bankruptcy.
