An IVA (Individual Voluntary Arrangement) can often provide a means of avoiding bankruptcy. IVA’s are a form of debt consolidation which involve the debtor making an offer to his or her creditors of a manageable payment plan. This is undertaken through the courts, assisted by an Insolvency Practitioner. You will be required to set out your financial position in full, including any assets and liabilities. You will also need to create a plan of action, detailing how you will pay your creditors. Once you have completed this proposal, you can apply for an Interim Order, which, if granted, prevents any further legal action being taken against you by your creditors while your proposal is considered. In the mean time, the Insolvency Practitioner will inform all the creditors of your proposal, who then attend a meeting and vote on whether or not to accept the proposal. A minimum of 75% of the creditors must accept the proposal for it to be implemented; once the proposal has been passed, all creditors who were informed and were entitled to vote are bound by the agreement.
Unlike bankruptcy, a debtor agreeing to an IVA has a greater chance of retaining major assets such as house and car, while they are not bound to the trading restrictions a bankruptcy order enforces. IVA’s are not only available to those who wish to avoid bankruptcy; even un-discharged bankrupts can apply with the possibility that their bankruptcy orders can be annulled.
