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In contrast to a Company Voluntary Arrangement, an Individual Voluntary Arrangement (IVA) concerns individuals who have become insolvent and in anticipation of bankruptcy seek to enter into an agreement with their creditors.

As with Company Voluntary Arrangements, the principal benefit of accomplishing an IVA is that creditors can no longer pursue claims against the individual’s assets or seek a declaration of bankruptcy.

Process of obtaining an IVA

An individual debtor wishing to set up an IVA will commission an Insolvency Practitioner to negotiate with the individual’s creditors.  The Insolvency Practitioner will construct a proposed repayment plan for the creditors. While this is being negotiated, it is possible for the Insolvency Practitioner to seek an interim court order preventing creditors from pursuing their claims or petitioning for bankruptcy.

The Insolvency Practitioner must submit their proposal to the relevant court accompanied by adequate reason why the IVA should be granted and is preferable to bankruptcy for the creditors.

When the creditors convene to consider the Insolvency Practitioner’s proposal, a threshold of creditors who hold the equivalent of 75% of the value of debt is required to approve. Most plans that are approved carry the condition of periodic payments that usually occur over a number of years.

Challenging the Insolvency Practitioner’s proposal

Any of the debtor’s creditors, the debtor or the Insolvency Practitioner can contest an IVA in court if: (1) it can be shown there was a procedural defect, including false information provided; or (2) the interest of a creditor had been unfairly prejudiced.

An appeal must be lodged within 28 days of acceptance of the proposal. If accepted by the court, the IVA can be cancelled or suspended pending review.

Maintenance of an IVA

In the course of the IVA’s operation, an individual debtor must notify the Insolvency Practitioner presiding over the agreement if they change address, obtain a new job or experience variation in income. If a variation is negative, the IVA can be amended to reduce monthly payments. The Insolvency Practitioner reviews maintenance of the IVA on an annual basis.

Failure of an IVA and bankruptcy

If payments are not kept up, both the Insolvency Practitioner and creditors can apply to court to have the individual declared bankrupt.

If an individual is struggling to make payments per month, it is possible to apply for a payment break of up to nine months if entered into after 1 January 2016 and between six to nine months if entered into between July 1 2012 and 31 December 2016.

Contact our IVA and Insolvency Solicitors Mayfair and throughout London

An IVA can be a useful means of appeasing creditors and avoiding a declaration of bankruptcy and its financial and professional repercussions.

The Insolvency Solicitors at Lewis Nedas have served a wide range of clients with their financial affairs during difficult times, including individuals in bankruptcy. We have provided expert advice on asset management, including reorganisation and restructuring of debts.

For further information or to speak to our expert Corporate Recovery & Insolvency Lawyers please contact us on 020 3811 6792 or complete our online enquiry form.

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