Individual Voluntary Arrangement (IVA)
An IVA is basically a contract between you and your creditors, under which you voluntarily agree to repay your debt. The arrangement must be prepared by a licensed insolvency practitioner, who will negotiate the agreement and then supervise the plan during the payment term. A typical arrangement will run for 5 years.
If you have assets that can be used to pay creditors, or access to a lump sum from family or other sources, then the arrangement may be settled with a single payment.
The contribution required will depend on your personal circumstances and on the level of your debt. Your creditors will have the opportunity to vote to accept or reject the proposal and in order for it to be successful, at least 75% of those voting must be in favour. This means that even creditors voting against a successful proposal will still be bound by it. With an arrangement in place, unsecured lenders can take no further action as long as payments are maintained, and interest on your debt is normally frozen.
The IVA proposal will seek to obtain agreement for a write down of your debt. The amount that the creditors can expect to receive will be illustrated as a percentage or a “pence in the pound” figure. This figure is referred to as the Dividend. In a situation where the alternative is bankruptcy, creditors may well vote to accept a very low dividend. On completion of the IVA all your remaining debt covered by the arrangement is written off.
An IVA does not have many of the serious implications of bankruptcy, you will be able to continue to run a business and operate a bank account, you will retain control of your finances rather than have them controlled by a receiver, and your employment should not be affected.