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.

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.

As an outline it can take between four and six weeks to set up an IVA, normally based on how quickly the individual can provide information such as copies of statements and payslips. This is known technically as the 'Nominee' process, as it requires a named Insolvency Practitioner to put forward the proposal. Each insolvency practice will have a slightly different process and will use slightly different templates but in general they all follow a similar pattern.

Fact Find
An interview either face-to-face or over the phone to establish a clear understanding of the situation, and confirm that an IVA is the most suitable approach.

Information collected includes: household information, background to the debt, creditors, assets, monthly income, monthly expenditure.

An IVA application can be made either as an individual (single) or as a household couple (joint). The latter does not require the couple to be married.

Collect Supporting Evidence
The insolvency practice is required to collect evidence that shows that what they are being told is true.

This due diligence makes sure that the proposed IVA is fair to creditors. i.e. That the amount paid each month is the full amount that the individual can afford.

But it also makes sure that the individual can afford the payments. i.e. That they are able to live without discomfort, and that they will be able to keep up the payments for five years.

Evidence includes
Evidence of debts (e.g. statements from each creditor)
Proof of income (e.g. payslips)
Proof of expenditure (e.g. rent, monthly bills, etc.)
Value of assets (e.g. property valuation, make/model/year of car, etc.)
Formal identification (e.g. passport, drivers licence)

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.

Based on all the information gathered a proposal document is drafted by the insolvency practice.

This document may be several pages long and is often in several parts (schedules).

There are a few basic types of IVA although most of them are very similar:

Single (one applicant) or Joint (two applicants)
Monthly payments only (normally 60 months)
Lump sum only (normally from remortgage)
Monthly payments plus lump sum

The debtor needs to read the IVA proposal and sign it once they are totally comfortable with the contents.

Send to Creditors

Once the IVA proposal has been signed by both the debtor and also by the Insolvency Practitioner who is acting as the Nominee, then copies are sent to each of the creditors.

Each copy is accompanied by any required background information and a covering letter from the Insolvency Practitioner.

The creditors are asked to read the proposal and vote on whether to approve it or not. They are also asked to provide proof of the claim they have for the debt.

Copies are also sent to the local county court and to the insolvency service.

Creditors Reviewing and Voting

The creditors are given a minimum of two to three weeks to review and respond to the proposal.

Often it is a specific department of the creditor that deals with the IVA, e.g. the Collections and Recoveries department.

Also the major banks tend to use one of the major accounting firms to help them process all of their IVAs. 70% or more of UK banks are represented by PwC, KPMG or Grant Thornton.

Sometimes it takes a few days for the proposal to be forwarded to the correct department or external firm.

Meeting of Creditors

A specific date and time is set to bring together the votes from the various creditors. The Insolvency Practitioner acts as the chairman of this meeting.

This is almost always a virtual meeting whereby the creditors send through their votes in advance by fax or by post. So there is no real meeting, it is more of a point in time to count up the votes.

Creditors can choose to 'Approve', 'Reject' or 'Approve with modifications'. Some creditors do not vote at all.

If 75% (by value of debts) of voting creditors approve the IVA, then it is approved for all creditors including those who rejected or did not vote.

If it is undecided the Insolvency Practitioner can put back (or adjourn) the meeting while he communicates between the creditors and the debtor. He can continue to do this for up to two weeks.

Post Meeting Set Up

Once the IVA has been approved, all of the relevant parties must be informed.

The Insolvency Practitioner sends out a Chairman's Report that documents the voting and the outcome of the meeting.

The court is also informed and a notice is sent to the Insolvency Service so that they can record the IVA on the Insolvency Register.

At this point a new bank account is set up for the IVA into which the payments are made monthly, and the Insolvency Practitioner begins the Supervision period.

Advantages

1. Interim order provides protection from duress creditors
2. Creditors all bound by IO whether knowledge of IVA or not
3. Preserves Individuals Business
4. Preserves Assets
5. Preserve Style & Living
6. Avoid unnecessary costs (DTI SOS FEE)
7. Avoid possibility of BRO
8. Avoid trustee pursuing vesting orders
9. Insurance claims can be used to fund IVA
10. Cheaper than BKY – lower costs

Disadvantages

1. Duration & payments for up to 5 years.
2. If default positioned worsened by BKY
3. Credit rating affected 6 years
4. Nominees costs and court fees
5. 75% in value of creditors needed to approve IVA

In order to help you keep your costs down to a minimum, complete the form below and we will contact you.

First Name:
Last Name:
Email Address:
Telephone:
Best time to call you:	NOW (Please allow up to 15 mins for a call back) AM PM
Total Debts:	Up to £5,000 from £5,000 to £10,000 from £10,000 to £15,000 from £15,000 to £20,000 More than £20,000
Additional Comments:

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.

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.

Source: www.insolvency.gov.uk

In order to help you keep your costs down to a minimum, complete the form below and we will contact you.

First Name:
Last Name:
Email Address:
Telephone:
Best time to call you:	NOW (Please allow up to 15 mins for a call back) AM PM
Total Debts:	Up to £5,000 from £5,000 to £10,000 from £10,000 to £15,000 from £15,000 to £20,000 More than £20,000
Additional Comments: