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Guide to Individual Voluntary Arrangements (Ivas)

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Guide to Individual Voluntary Arrangements (Ivas) Guide to Individual Voluntary Arrangements (IVAs) 1. What is an Individual We will discuss the likely impact Information on the various Voluntary Arrangement (IVA)? of each debt solution (IVA, personal insolvency options can bankruptcy, DMP, DRO and be found in our Guide to Personal If an individual (the debtor) is administration orders) on the Insolvency. unable to pay his/her debts when debtor and the debtor's assets, in they fall due they can be described particular the family home, and Preparation of the proposals as insolvent. An IVA is a legally on third parties that may be In the event that an IVA is the binding contract between a debtor affected. We look at the most appropriate procedure we and his/her creditors to repay advantages and disadvantages of assist the debtor in preparing an some or all of their debt over a each option, and the likely costs IVA proposals. We will ask the period of time. It is an alternative to of each so that the solution best debtor for help: other debt solutions such a suited to the debtor's bankruptcy, debt management circumstances can be identified. • to provide sufficient information plans (DMP), debt relief orders We will confirm this in writing and for creditors to understand the (DRO) and administration orders. provide a financial comparison debtor's financial and trading summary where possible. history including The terms of an IVA can be • the debtor's background and flexible, but creditors do expect If the debtor considers that an financial history. their prospects of recovering IVA is the right process they • why the debtor has become money to be at least as good as in should read the R3 document 'Is insolvent. a bankruptcy. Creditors will want a Voluntary Arrangement Right • any other attempts that have the IVA to contain sanctions (such For Me' been made to solve the as a right to bankrupt the debtor) if https://www.r3.org.uk/media/docu debtor's financial difficulties. the debtor does not fulfil his/her ments/publications/professional/I • to provide a comparison of part of the arrangement. s-a-Vountary-Arrangement-Right- estimated outcomes of the IVA For-Me.pdf and the likely outcome if the An IVA usually requires the debtor IVA is not approved, and. to pay monthly contributions to a It is important the debtor • where relevant, to provide supervisor over a period of five understands the implications of sufficient information to support years. Alternatively, an agreement an IVA and should discuss any any profit or cash projections, can be reached for a one off concerns with us. subject to any commercial payment possibly by a third party sensitivity. which facilitates a much shorter 3. The four stages of a IVA period of arrangement. We will ask the debtor whether There are four distinct stages he/she understands the terms of 2. Is it the right procedure? associated with an IVA the proposal and what their responsibilities are in relation to We always offer a face-to-face Advice the proposal. We check that the meeting with the debtor to discuss Initially we advise the debtor to debtor is happy for the proposal to their options. After the debtor has determine the most appropriate be put to their creditors. engaged us we will happily discuss procedure (if any) for the debtors any concerns the debtor may have individual circumstances. At this and arrange further meetings as stage we will be working in the necessary. debtor's interests in the context of finding a workable solution to the financial difficulties. We may contact some of the higher Acting as Nominee It is common for creditors to value creditors for their views prior Once the proposal is finalised the propose modifications to finalising the proposal to. We do this debtor presents this to us and if proposals, either prior to the so their views can be taken into we are satisfied that the proposal meeting of creditors or at the consideration when writing the is achievable and that a fair meeting. When significant proposal and therefore give the best balance is struck between the modifications are proposed it is opportunity of the proposal being interests of the debtor and the sometimes necessary to adjourn approved by creditors. Please be creditors we will agree to act as the meeting in order to ascertain aware, however. that HM Revenue the nominee. whether the debtor and other and Customs do not normally creditors are in agreement with engage until they have the finalised We will set a date for the proposed modifications. Any proposal. creditors' meeting to consider the adjournment will cause a delay in proposal and send all creditors a obtaining agreement to the In complicated or complex situations copy of the proposal together proposal. it may be advisable to apply for an with the nominee's report and interim order prior to sending comments. The nominee confirms with the proposals to creditors. If a creditor debtor that he/she understands is threatening to petition for the In making our report we will the impact and implications of any debtor's bankruptcy and time is ensure that we have obtained modifications on the IVA and its required to enable all creditors to from the debtor sufficient viability. The debtor will need to consider an IVA proposal then an information to make an decide whether they consent to interim order will provide breathing assessment of an IVA as a those modifications. In the space. There is an additional cost solution, and to enable us to absence of the debtor's consent for an interim order and it may cause prepare a report, including: the IVA cannot proceed. a delay in obtaining an arrangement. • the measures taken by the At the meeting of creditors, 75% There may be other complexities debtor to avoid recurrence of by value of those voting, need to due to the nature of the debtor's their financial difficulties, if agree to the proposals (with or trade, for example there are specific any, without modifications) and if this regulations that apply to licensed • the likely expectation of key majority is obtained there is a premises. We will always discuss creditors; second count, this count excludes these complications with the debtor • the effect of the IVA on third connected creditors, and if at least so that the debtor understand the parties where their view may 50% by value of the remaining issues and any delays that they may have an effect on the viability creditors vote in favour the IVA is cause. of the IVA; and proportionate approved and implemented. investigations into, and It is important that a debtor makes verification of, income and If creditors do not approve the full disclosure of all of his/her assets expenditure and assets and proposals then the debtor may and liabilities. Debtors should be liabilities. want to consider other alternatives aware that it is an offence to make a such as petitioning for his/her own false representation to creditors for Our nominee's report will include bankruptcy. Alternatively a the purpose of obtaining the whether or not: creditor may take further steps to approval of his/her creditors to a recover their debt and this could proposed voluntary arrangement. It • the debtor's financial position include petitioning for the debtor's is an offence whether or not the is materially different from that bankruptcy. Please be aware, arrangement is approved by contained in the proposal, even if the proposals are not creditors. explaining the extent to which approved by creditors, that the the information has been adviser and nominee will not Prior to accepting an appointment as verified, normally refund any fee paid in nominee we are required to assess • the IVA is manifestly unfair, respect of their work. If the fee whether the debtor has sufficient and remains unpaid it will be a liability understanding of the process of an • the IVA has a reasonable of the debtor that will still need to IVA, its likely duration and the prospect of being approved be paid. consequences, and whether there and implemented. will be full co-operation and commitment from the debtor. A debtor is required to co-operate with the nominee and supervisor at all times. Acting as Supervisor The proposal sets out what is required 4. Further information Once creditors have approved of the debtor and provided the debtor is the IVA (with or without able to comply with the terms of the modifications) then it is normal IVA then, at the end of the duration of Further information on personal for the nominee to take on the the arrangement, the debtor will insolvency options can be found role of the supervisor of the receive a certificate of compliance. in our Guide to Personal arrangement. Most creditors are not entitled to Insolvency. pursue the debtor following the It is possible for a creditor, the successful conclusion of the All partners are experienced debtor or a nominee to challenge arrangement, however this does not chartered accountants licensed the decision of a creditors' apply to certain creditors including meeting and if he can secured creditors (e.g. the mortgage to act as insolvency practitioners demonstrate to the satisfaction of company), providers of student loans by the ICAEW. The partners are the court that the arrangement and any deferred creditors. supported by qualified unfairly prejudices the interests of experienced staff. a creditor or there has been If at any time during the arrangement it some irregularity at or in relation becomes apparent to the debtor that Please contact one of our team to the meeting, then the court they will not be able comply with the for more information or to discuss may order that the arrangement terms of the arrangement then they is revoked, suspended or make should immediately notify the any financial difficulties you may other such order as it thinks fit.
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