The Procedure for an Individual Voluntary Arrangement IVA
The first step is to find an company who will be able to establish if you are eligible for an 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 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.
Many advice agencies have referral arrangements with Insolvency Practitioners and can arrange an initial free consultation. If the adviser has no contacts, the local Official Receiver’s (OR’s) office keeps a rota of Insolvency Practitioners to whom they themselves refer cases. Otherwise, details of IPs in the locality can be obtained from the Association of Business Recovery Professionals (R3), Halton House, 20-23 Holborn, London, EC1N 2JD. IPs 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 IP’s fees are agreed as part of the IVA. A typical fee is £3,000.
The IP will draw up a ‘proposal’ for the person’s creditors and the court. The IP 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%, 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. Information that must be contained in the proposal includes:
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.
The anticipated level of the person’s income during the period of the IVA.
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).
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.
Details of the client’s debts and of any guarantees given for them by third parties.
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.
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 IP 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:
Whether the proposed IVA has a reasonable prospect of being approved and implemented.
Whether a meeting of the client’s creditors should be summoned to consider the proposal.
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:
a copy of the proposal
a copy of the statement of affairs
a copy of the endorsed notice of proposal
a list of the documents filed containing a statement confirming that the client does not intend to apply for an interim order
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.
