Common questions regarding IVA |
IVA is a legally binding arrangement supervised by a Licensed Insolvency
Practitioner, the purpose of which is to enable an individual, sole trader
or Partner ("the Debtor") to reach a compromise with his creditors and avoid
the consequences of bankruptcy. The compromise should offer a larger
repayment towards the creditors debt than could otherwise be expected were
the Debtor to be made bankrupt. This is often facilitated by the Debtor
making contributions to the arrangement from his income over a designated
period or from a third party contribution or other source that would not
ordinarily be available to a Trustee in Bankruptcy
Following are the commonly asked questions about IVA
Who Can Benefit From an IVA
An IVA is available to all individuals, Sole Traders and Partners who are
experiencing creditor pressure and it is used particularly by those who own
their own property and wish to avoid the possibility of losing it in the
event they were made bankrupt.
It is also often used by sole traders and Partners who have suffered
problems with their business but wish to secure its survival as they believe
it will be profitable in the future which will enable them to make a greater
repayment to creditors than could otherwise be expected were they made
bankrupt and the business consequently cease trading.
The Procedure in Brief
In theory it is envisaged that the Debtor drafts proposals for presentation
to his creditors prior to instructing a Nominee, (who must be a Licensed
Insolvency Practitioner), to review them before submission to court and then
to the creditors.
In practice the Nominee draws up the proposal upon the information provided
by the Debtor and submits these to court with his comments on the merits of
the proposals with a view to obtaining an Interim Order. An Interim Order is
an order made by court precluding creditors from taking any action against
the Debtor whilst a meeting of creditors is called and held to decide
whether the proposals are acceptable to them or not. Following the granting
of the Interim Order the Nominee will circulate to creditors the following
information:-
The Nominees comments on the debtors proposals
The Proposals
 Notice
of the date and location of the meeting of creditors to vote on the
proposals
A
Statement of Affairs this effectively being a list of the assets and
liabilities of the Debtor
A
schedule advising creditors of the requisite majority required to approve
the IVA
A
complete list of creditors
A
guide to the fees charged by the Supervisor following approval of the IVA
A form of proxy for voting purposes
The creditors meeting is held not earlier than following 14 clear days
notice after the above has been circulated to creditors. The purpose of the
meeting of creditors is to agree or reject the Debtors proposals with or
without modifications which can be requested by creditors at the meeting.
Acceptance of the proposals requires 75% in value of those creditors who
vote either in person or by proxy at the meeting.
Please note that the 75% relates only to those who actually vote and
assuming the creditors receive notice of the proposals, all will be bound by
the terms of the arrangement whether they voted or not.
Upon approval of the IVA, a Supervisor is appointed (usually the Nominee) to
ensure the proposals are adhered to and to distribute the dividends to
creditors.
Assuming the debtor complies with the terms of the arrangement, upon
completion of the IVA he will be fully discharged from all liabilities
included within it.
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