What is an IVA?

An IVA is a formal agreement made between a debtor and his creditors about how the debts will be paid (either in full or in part).  You need to apply to a court and an insolvency practitioner has to be appointed to supervise the arrangement. 

An IVA is an alternative to bankruptcy.  The terms of the proposal to creditors may be very flexible, but creditors would usually expect that they would receive at least as much from the debtor as they would if the debtor was made bankrupt. 

How do I get an IVA?

An insolvency practitioner (IP) must be involved in an IVA, so you need to find an IP who is willing to act as the nominee of the arrangement.  The role of the IP changes during the progress of the case.  At first, before you have committed yourself to an IVA, the IP is a professional adviser.  He should help you to make your decision about what to do.  If you decide to go ahead with the IVA he should help you to put down your proposals to your creditors. 

You would either:

• apply to court for an interim order, which stops your creditors taking action against you before your proposal is accepted by your creditors, or
• go ahead with your proposal without applying for an interim order.

If you apply for an interim order and your creditors do not accept your proposal, you should be aware that you are not able to apply for another interim order for at least 12 months.

Once you have decided to go ahead with an IVA the IP becomes your nominee.  The nominee has to tell the court about the proposal and, if he thinks the proposals are not fit to put before a creditors’ meeting, he must tell the court.  The court may then end the IVA at that stage.  If it appears to the IP and to the court that the proposals are acceptable, a creditors’ meeting will be held to give the creditors a chance to vote on whether or not to accept the proposals.  If 75% in value of creditors who are represented at the meeting (in person or by proxy) vote in favour of the proposals, the IVA will be implemented.  Creditors may ask for changes to the proposal, but the debtor must agree to any changes.  Once the proposal is approved it is then binding on all creditors, even unknown creditors (those who had not received notice of the creditors’ meeting).  However, once he becomes aware of it, an unknown creditor is able to apply to the court to challenge an approved IVA and the court has the power to revoke the IVA. 

If the creditors approve the IVA the IP’s role changes again and he becomes the supervisor and his responsibilities are mainly governed by the terms of the arrangement.  He has to act even-handedly between the debtor and the creditors and to ensure that the terms of the proposal are fulfilled.

Whilst an IVA is in force, creditors who are bound by the IVA cannot take any debt recovery action against the debtor.  They must look solely to the IVA for repayment of the debts, either in full or in part. 

Can I complain about the supervisor of my IVA?

If you are unhappy about the conduct of an IP, you may first be able to resolve your complaint by taking it up with the IP concerned. 

If you think that an IP is acting unprofessionally, improperly or unethically, you can make a complaint to the appropriate authorising body. On our website  www.insolvency.gov.uk  you will find a searchable IP database, which will provide details of an IP's licensing body.

It must be stressed that the authorising body cannot intervene directly in individual insolvencies; nor can they give directions in relation to the conduct of individual cases, or reverse or modify a decision of an IP.

The court resolves commercial or other disputes.  Under section 263(3) of The Insolvency Act 1986, if any person is dissatisfied by any act, omission or decision of the supervisor, s/he may apply to court.  The court can confirm, reverse or modify any act or decision, give the supervisor directions, or make such order as it thinks fit. 

What happens when the IVA is completed or it fails?

When an IVA is completed, or if it fails, the supervisor must send a notice to the debtor and to all creditors who were bound by the arrangement, saying that the arrangement has either been completed or has failed.  This notice must be sent within 28 days of the completion or failure.  The supervisor must also send a report that summarises all receipts and payments made by him during the IVA.  He must also explain any differences between what the debtor proposed and what actually happened. 

These reports must also be sent to the Secretary of State, within 28 days of completion or failure.  This will ensure that the details are removed from the Individual Insolvency Register.

 Click HERE for a Brief Overview of the IVA Process 

FAST TRACK INDIVIDUAL VOLUNTARY ARRANGEMENTS (FTVAs)

FTVAs are voluntary arrangements where the OR acts as nominee and supervisor post bankruptcy. There is a provision in the legislation for it to be changed to allow the OR to act in pre-bankruptcy cases, but at the moment, the OR is supervising post-bankruptcy cases only. FTVAs are similar to IVAs but no meeting of creditors is required and no modifications to the proposal by creditors are allowed.   

FTVA Process

They are identified through the interview stage. The bankrupt completes a proposal and returns it to the OR with the registration fee of £10. The OR has 28 days to decide whether to act as nominee. The proposal is sent to the creditors for voting.  More than 75% in value of those voting is required before it is accepted.  

Once accepted the case is passed to an RTLU who will file a report of approval at court. The OR (of the RTLU) then becomes supervisor. The RTLU arranges an annulment of the Bankruptcy Order and administers the FTVA. 

The RTLU collects the payments from the bankrupt, via Finance section. If the debtor defaults on payment Finance section advises the RTLU and the RTLU will contact the debtor to find out the reasons for the default. 

FTVAs are suitable for simple asset cases (non traders). 

The nominee fee is £310, the registration fee is  £10 and the supervisor’s fee is 15% of all asset realisations.