Individual Advice – Formal – Individual Voluntary Arrangements | DCABR

Safeguard Your Assets, Avoid Bankruptcy And Take Control Of Your Debts

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their unsecured creditors that enables the individual to deal with their debts and repay them all, or part of the debt over a period, which is typically a 5-year period. Sometimes, the individual may decide to make a one- off payment if they do not have surplus income, decide to sell one of their assets, or if a family member or third party offers to make a voluntary lump sum payment into the IVA arrangement that would not be available in bankruptcy. The individual will be able to keep their assets and remain in control. An IVA is an alternative to personal bankruptcy.

An IVA can write off significant levels of unsecured debt. The individual will not be faced with the constrains of bankruptcy and they will keep their personal assets, unless any assets have been voluntarily offered into the IVA proposal.

An IVA can only deal with unsecured creditors and any secured debts will have to still be made as a secured creditor can apply to repossess your home if the ongoing payments are not met.

In most IVA’s the interest is frozen and there is no minimum or maximum dividend and it will depend on the individual’s personal circumstances and the individual will need to make a full disclosure of their assets and liabilities.

At the end of the IVA period, the remaining debts will be written off and a certificate of completion will be sent to the individual and all creditors in the IVA.

Frequently Asked Questions

How long does the process take to start the IVA?

Due to the amount of work required to prepare a proposal to be sent to creditors we advise that a period of 4-6 weeks from initial instructions to providing the final proposal to creditors.

Who prepares the proposal for my IVA?

The IVA proposal will be drafted and drawn up by a Licensed Insolvency Practitioner (IP), who will have a meeting with you and initially will be an advisor to you to advise you on the procedure and advantages and disadvantages of the IVA compared to Bankruptcy. Once you decide to start with an IVA, the IP will then be the Nominee to your IVA and this is before creditors vote on your IVA proposal. If creditors vote to accept the IVA proposal, the IP will then be the individuals Supervisor in the IVA.

Who decides how much is paid every month?

We will prepare the proposal based on information provided by the individual and a monthly income and expenditure will also be prepared, which will show the amount that is manageable to be repaid to the creditors on a monthly basis.

Do I need to sell my assets, or purchase the assets back?

No, but there are matters to consider if the individual owns their own property. In an IVA the individual will keep their assets, unless they agree to put any assets in the IVA. However, if the individual owns a property, whether this is in their own name, or owned jointly, any equity in the property will be looked at by the Supervisor of the IVA and creditors will normally insist that a modification is put into the IVA proposal to deal with any equity that will be available to creditors. The property is usually valued in the final year of the IVA and the equity available will be discussed with the individual. This could result in the individual having to remortgage their property, or to introduce a lump sum into the arrangement, but this should not result in the property being sold. If the equity available is less than £5,000, then the equity in the property may be exempted in the IVA. If the individual cannot afford to re-mortgage the property, then they will need to provide proof of this and it could mean that the IVA is extended for a further 12 months and the individual will be expected to pay a further 12 months of voluntary contributions. When a property is owned by the individual, whether jointly or solely, this will be discussed in detail with the IP before you agree to proceed with the IVA proposal.

Who agrees the IVA proposal?

For the IVA to be accepted, it will require 75% (in debt value) of your creditors voting on the proposal to agree the terms. If no creditors vote on the proposal, then the decision can be adjourned for up to 14 days to obtain the creditors votes.

What happens if the other creditors do not agree?

If the proposal is accepted by 75% (in debt value) of creditors voting on the proposal, then the arrangement is accepted and as such all creditors are bound by its terms.

Creditors can put forward modifications to the proposal when voting, but the individual will need to agree to any modifications. This will also be dependent on the value of the vote the creditor has.

Can I be made bankrupt when I am in an IVA?

If the individual misses 3 monthly payments, in any 12 month period and these do not have to be consecutive, then the Supervisor (Insolvency Practitioner) may have to report this to creditors which can lead to the Supervisor petitioning the court for the individuals bankruptcy. If the individual also fails to comply with the terms of the IVA, this can lead to the IVA failing and being made bankrupt.

Individual Voluntary Arrangements