The first step is to find a company who will be able to establish if you are eligible for an individual voluntary arrangement (IVA). Be very wary of some companies who say they have to collect the relevant information to see if you qualify for an IVA. It is no problem to ascertain that it is the way forward from the initial first meeting.
We recommend that you have as much information regarding your creditors' balances and personal details when being visited by, or visiting, an advisor. This will make it much easier for them to give the correct advice.
Many advice agencies have referral arrangements with insolvency practitioners and can arrange an initial free consultation. If the advisor has no contacts, the local Official Receiver's (OR) office keeps a rota of insolvency practitioners to whom they themselves refer cases. Otherwise, details of insolvency practitioners in the locality can be obtained from:
Insolvency Practitioners
Association of Business Recovery Professionals (R3),
Halton House,
20-23 Holborn,
London,
EC1N 2JD.
Insolvency practitioners are required by their regulators to give a leaflet to everyone who consults them about an IVA. The leaflet "Is a Voluntary Arrangement Right For Me?” is available at www.r3.org.uk. The insolvency practitioner's fees are agreed as part of the IVA. A typical fee is £3,000.
The insolvency practitioner will draw up a 'proposal' for the person's creditors and the court, they have a duty to ensure a fair balance between the interests of the client and the creditors. In the proposal the client will make a repayment offer to creditors. The proposal has to be accepted by at least 75 per cent, in value, of the creditors and so it should be a more attractive financial offer than the creditors could expect to receive in a bankruptcy. This means paying a higher dividend to creditors and the proposal will set out how the client intends to achieve this. It is an offence for a client to make any false representations or to act in a fraudulent manner in connection with an IVA proposal.
The client should have as much information as possible for the advisor / IP regarding her / his financial affairs. Advisors can assist by preparing a financial statement as well as a list of debts and assets. Information that must be contained in the proposal includes:
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Details of the proposed arrangements, including why an IVA is the appropriate solution and likely to be accepted by creditors. IVAs do not usually provide for payment of the client's debts in full. They normally provide for her / his available income and the proceeds of the sale of any assets to be distributed to creditors on a pro-rata basis, with the balances being written off, i.e., a composition.
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The anticipated level of the person's income during the period of the IVA.
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Details of all assets (together with their estimated value) and of any assets being made available by third parties (such as a relative or friend who is prepared to make a payment to prevent the client from being made bankrupt).
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Details of any charges on property in favour of creditors and of any assets that the client proposes to exclude from the IVA. It is usual to make some arrangement for realising the client's share in any equity in the family home and, where such a provision is included in the IVA, it is important that the client appreciates its potential significance.
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Details of the client's debts and of any guarantees given for them by third parties.
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The proposed duration of the IVA and the arrangements for payments to creditors, including the estimated amounts and frequency. IVAs do not normally last longer than 5 years.
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Details of the supervisor and of the fees to be paid to the nominee and the supervisor. An experienced advisor / IP will be aware of what proposals are likely to be acceptable to creditors and the court and which are not,
and will ensure that the proposal complies with the requirements of the Insolvency Act. The IP is required to endorse the notice of the proposal to indicate that s/he is prepared to act and will not do so unless s/he is satisfied that the proposal is viable. Once the insolvency practitioner has signed the proposal, s/he becomes the client's 'nominee'. Following the making of the proposal, the client must prepare a statement of affairs, (this will be done for you by some companies such as Debt Free Me) containing detailed particulars of the matters contained in the proposal.
Within 14 days the nominee must file a report at the court stating in her / his opinion:
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Whether the proposed IVA has a reasonable prospect of being approved and implemented.
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Whether a meeting of the client's creditors should be summoned to consider the proposal.
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If so, the date and the time and place where s/he proposes the meeting should be held.
At the same time, the nominee should also file:
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a copy of the proposal;
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a copy of the Statement of Affairs (SOA);
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a copy of the endorsed notice of proposal;
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a list of the documents filed containing a statement confirming that the client does not intend to apply for an interim order;
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the fee (currently £30).
The court in which the report should be filed is the county court for the district in which the client resides (unless s/he is an undischarged bankrupt, when the report should be filed in the court having conduct of the bankruptcy). Any application to the court in relation to the IVA is made to the court where the nominee's report was filed.
Click on the headers below for detailed information
Creditors Meeting For An Individual Voluntary Arrangement (IVA)
The first step is to find a company who will be able to establish if you are eligible for an IVA. Be very wary of companies who say they have to collect the relevant information to see if you qualify for an IVA. It is no problem to ascertain that it is the way forward from the initial first meeting. We recommend that you have as much information regarding your creditor's balances and personal details when being visited or visiting an advisor/IP. This will make it very easy to give the correct advice.
Debt Free Me can arrange a free consultation to determine whether or not an IVA would be a suitable solution for you.
Insolvency practitioners are required by their regulators to give a leaflet to everyone who consults them about an IVA. The leaflet "Is a Voluntary Arrangement Right For Me?" is provided by www.r3.org.uk. The insolvency practitioner's fees are agreed as part of the IVA. A typical fee is £3,000.
The insolvency practitioner will draw up a 'proposal' for the person's creditors and the court. The insolvency practitioner has a duty to ensure a fair balance between the interests of the client and the creditors. In the proposal the client will make a repayment offer to creditors. The proposal has to be accepted by at least 75 per cent, in value, of the creditors and so it should be a more attractive financial offer than the creditors could expect to receive in a bankruptcy. This means paying a higher dividend to creditors and the proposal will set out how the client intends to achieve this. It is an offence for a client to make any false representations or to act in a fraudulent manner in connection with an IVA proposal.
The client should have as much information as possible for the advisor/IP regarding her/his financial affairs. Advisers can assist by preparing a financial statement as well as a list of debts and assets.
Challenging The Individual Voluntary Arrangement (IVA)
The client, or any creditor, can appeal to the court against the IVA within 28 days of the report of the creditors' meeting being made to the court (including those who did not receive notice of the meeting, who have 28 days from when they found out about it), but only on the grounds that:
There were irregularities in the way the meeting was held, e.g. the proposal contained misleading or inaccurate information; or
The arrangement unfairly prejudiced the rights of a creditor, e.g. where the client and her/his partner are jointly and severally liable for a number of unsecured debts and the majority of creditors accept the client's proposal that no creditor should be able to pursue her/his partner in respect of those debts, a creditor who might otherwise have been able to pursue the partner as co-client may object to the IVA on that basis.
If the court considers that the challenge is justified, it may:
Conduct Of The Individual Voluntary Arrangement (IVA)
The insolvency practitioner's role as 'supervisor' of the IVA is to implement it and ensure that the client carries out her/his side of the arrangement as agreed, seeking guidance from the court if necessary. The supervisor will arrange the sale of any assets that need to be sold and collect the payments due from the client, and distribute them to the creditors. If the client's circumstances change, it may be possible for the original agreement to be modified at a creditors' meeting. The supervisor may be able to extend the period of the IVA to enable the client to complete the payments. IVAs often make provision for such eventualities.
Provided the client complies with the IVA s/he will be discharged from her/his liability to all creditors covered by the IVA at the end of the period. The IVA will not, however, automatically discharge any co-client, including the person's spouse or partner. Any provision for this will have to be specifically included and agreed. However, unless the joint income is used to fund the IVA (or the partner/spouse has no income), creditors may challenge the IVA as unfairly prejudicial.
If the terms of the IVA are not complied with, then the arrangement will usually provide for the supervisor to petition for the client's bankruptcy.
Interim Order For Individual Voluntary Arrangement (IVA)
Unless and until the IVA is approved, the client is vulnerable to enforcement action by creditors. To avoid this, once the insolvency practitioner has become the nominee, the next step is to apply to the court for an 'interim order'. The effect of an interim order is that:
No creditor can try and make the client bankrupt.
No landlord may exercise any right of forfeiture by peaceable re-entry.
No court proceedings or other enforcement action (including the levy of distress) may be commenced or continued against the client or her/his property without the permission of the court.
The application is made to the county court for the insolvency district in which the client resides (or the court which has conduct of the bankruptcy where the client is an undischarged bankrupt). It must be accompanied by an affidavit (a sworn statement) and a copy of the endorsed notice of the proposal. A court fee is payable.
The court sets a hearing date to consider the matter and gives two days' notice. The court can freeze (or 'stay') any other court proceedings or enforcement action against the client (including forfeiture by peaceable re-entry) pending consideration of the application, and usually does so. If the client is an undischarged bankrupt, notice must be given to the official receiver and any trustee.
The court can make an interim order provided that:
It is satisfied that the proposal is 'serious and viable' i.e., that it has not been made just to delay the making of a bankruptcy order and with no benefit to creditors.
The insolvency practioner is prepared to act as nominee.
The insolvency practitioner is prepared to act as nominee.
There has been no application for an interim order in the previous 12 months.
The client is either an undischarged bankrupt or could petition for her/his own bankruptcy.
An interim order initially lasts for only 14 days but is usually extended to allow sufficient time for the creditors' meeting to take place and for the nominee to report back to the court. An IVA cannot be made unless the creditors support the arrangements. Therefore, the next step is for the court to consider whether it will be worthwhile holding a meeting of creditors to consider the terms of the client's proposals. The nominee must submit a report to the court indicating whether, in her/his opinion:
The proposal has a reasonable chance of being approved and implemented.
A creditors' meeting should be called; and the proposed date, time and place of the meeting.
In most cases this is presented at the same time as the application for the interim order. Provided the court is satisfied that the proposals are worthy of being put to creditors, the court will usually endorse the recommendation and extend the interim order for seven weeks after the proposed date of the meeting (where the matters are dealt with together the order is known as a 'concertina order').
If the court rejects the nominee's recommendations, the interim order is discharged and any proceedings or enforcement action can continue.
