How an IVA works

Introduction

The UK Insolvency Helpline IVA team advise on 1000s of IVAs each year. In this brand new section we will provide a detailed guide to the different steps that you need to take to start an IVA.

It is important to understand all the IVA frequently asked questions such as:-

1. Where to get IVA Advice?
2. What the IVA costs are?
3. What IVA approval process is?
4. What IVA criteria are?
5. Whether you should choose bankruptcy or an IVA?
6. How does an IVA work?
7. We will provide you with all the help and advice you need in order to start an IVA
8. We will discuss whether to choose bankruptcy or an IVA

The main point to note is that you must be prepared and have all the appropriate documentation to allow us to start your IVA.

An IVA is an alternative to bankruptcy. It is a contract between you and your creditors.

In order for your IVA to start the creditors must be very flexible, creditors will reasonably expect their prospects of recovering money to be at least as good as in a bankruptcy. They will also expect the IVA to contain the options available if the IVA does not get off to a good start.

To start the IVA the IVA team will help you with your proposal to creditors and, initially, he is known as your ‘nominee’. If the creditors accept your proposal, an insolvency practitioner then becomes the ‘supervisor’ of the IVA.

Your proposal will be voted on by your creditors at a creditors’ meeting . Generally, if over 75% by value of your creditors who are represented at the meeting (in person or by proxy) vote in favour, the IVA will be implemented.

Creditors may put forward changes to the proposal, but they cannot impose them on you – you can decide whether or not to accept them.

You are not legally required to attend the creditors’ meeting, but in practice you should be there. Otherwise it will be impossible to agree any changes to the proposal. If last-minute changes are proposed, you should feel free to ask for reasonable time to think about them. If necessary, seek your IP’s private advice outside the meeting about what is being proposed.

An IVA gives you an opportunity to avoid bankruptcy. If it is not approved, a creditor may bankrupt you. It follows that you should put forward the best offer you can to your creditors. Be completely open and honest with your IP and the creditors about your financial circumstances.
How do I start an IVA?

1. You complete and return our standard application form together with copies of all recent bank statements. We will then discuss areas with you such as what the costs of the IVA are.
2. On receipt of your questionnaire one of our consultants will contact you in order to talk through your application. At this juncture we will discuss whether to choose bankruptcy or an IVA. We can also talk to you the IVA criteria.
3. If our case meets our standard criteria you will accepted onto the Individual Voluntary Arrangement – IVA programme and referred to one our panel members. At this juncture we will provide you with all the help and advice you need in order to start an IVA
4. The panel member will now act for you and will then contact all your creditors informing them that they are now your legal representative. At this juncture we can always answer questions on how does an IVA work.
5. Based on the information provided by you an Individual Voluntary Arrangement – IVA proposal will be draughted , this is a written agreement which sets out the actual terms of the Individual Voluntary Arrangement – IVA.
6. In order to legally protect you from your creditors a form of legal protection called an “interim order” is granted. This is a process which enables full protection from your creditors.
7. Once the Interim Order is granted no legal action may be bought against you. Having an interim order means you are fully protected from creditors issuing or continuing bankruptcy proceedings.
8. The panel member then prepares a statement called a “Nominees Report” which portrays a professional opinion as to whether the Individual Voluntary Arrangement – IVA is a bonafide offer.
9. Shortly afterwards a meeting of creditors is held. In theory this meeting consists of all the creditors gathered in a room to discuss the Individual Voluntary Arrangement – IVA. In practice, however, creditors rarely attend because all voting is done prior to the meeting.