Individual Voluntary Arrangement (IVA)
How Does an IVA Work?
An IVA is designed to formally restructure the debts between the debtor and their unsecured creditors. The IVA is a legally binding agreement with creditors that allows the applicant to offer a reduced payment based on affordability to their creditors for a pre-arranged fixed term. An IVA freezes interest on unsecured debts and allows an individual to agree with their creditors that they will repay either all of their debts or a percentage of them over a number of years.
While your creditors are not compelled to accept your request for an IVA, they will often consider it if the alternative is bankruptcy and they would be financially worse off. By law, an insolvency practitioner must administer the process. This involves making a formal proposal for repayment to the creditors over a period of time. The debtor must make a full disclosure to the Nominee of all assets and liabilities. The insolvency legislation requires a debtor to prepare the proposal to their creditors with the help of a licensed insolvency practitioner (IP), who is called their Nominee.
The proposal put to creditors must demonstrate better prospects for recovery by agreeing to the IVA than if the individual is made bankrupt. The proposal is confidential and the debtor remains in control of their assets, but the conduct of the IVA is overseen by an IP, who is known during the process as the Supervisor. This is usually the same IP who acted as the Nominee.
An individual can put proposals for an IVA to their creditors if they have already been declared bankrupt or been presented with a Bankruptcy Petition by a creditor. If the debtor is self-employed and has a viable business, they can continue to trade.
Debt Requirement in IVA
There is no minimum debt level required to enter an IVA. There are a number of creditors who have minimum requirements for repayment. We are able to assist you with this.
Mortgages and Secured Loans
Secured loans can be included within an IVA but the creditor has no obligation to accept the IVA proposal. It is unlikely that secured creditor will vote for an IVA, as the only real incentive a lender would accept the proposal is the fact they will not be paid otherwise. With a secured creditor, the lender can realise the assets that they have security over to repay the debt.