In England and Wales, an individual voluntary arrangement ( IVA ) is a formal alternative for individuals who want to avoid bankruptcy.
IVA was established by and governed by Section VIII of the Bankruptcy Act 1986 and is an official payment proposal submitted to the debtor's creditors through a bankruptcy practitioner. Usually (but not necessarily), the IVA only consists of unsecured creditors' claims, leaving the rights of the secured creditors largely unchanged. Insolvency practitioners charge an initial fee and an additional cost of debt.
IVA is a contractual agreement with the creditor and can be as flexible as the individual's own circumstances; therefore they can be based on capital, income, third party payments or a combination of these.
In this process, a debtor who has enough money left after the priority creditor and principal disbursements may be able to regulate voluntary arrangements individually. (After taking independent advice, debtors with less serious issues may want to consider debt management plans.)
The analogous procedure for business is the company's voluntary arrangement.
Video Individual voluntary arrangement
Process
The creditor makes a decision at the creditor's meeting called to consider the IVA proposal. The return of creditors is often higher than they would receive in bankruptcy. A vote is taken - by value. 75% of the creditors who vote at the meeting by the person or the representative must agree to have the arrangement approved. If one of those chooses is a 'partner' (usually a business partner, friend and family) then the second count is taken and 50% of unrelated creditors must agree.
IVA was originally designed to provide assistance to the debt generated as a result of business bankruptcy. In recent years, rising levels of consumer debt have led to many bankrupt individuals with non-business-generating debt seeking legal protection offered in the IVA. IVA may be popular among people who have large assets they want to protect. These assets, such as properties with high equity and expensive cars, etc., are not directly at risk under the IVA - because they may be in bankruptcy.
Maps Individual voluntary arrangement
IVA or bankruptcy
An IVA is an alternative to bankruptcy, but they are not mutually exclusive. A person can apply for an IVA after they are declared bankrupt. If an arrangement is approved post-bankruptcy then the debtor may apply to the Court for the cancellation of a bankruptcy order - such IVA can only be filed while the bankrupt party is not charged. If an IVA is proposed after a bankruptcy order has been established, it is now also possible to nominate an Authorized Recipient to become a regulatory supervisor. The settings offered by the Official Receiver are usually very limited and not very popular. This type of setting is called a fast track relay setting and is only suitable in certain cases.
Advantages and disadvantages
The advantages and disadvantages of IVA compared to other debt solutions are specific to the circumstances of individual debtors and professional advice should be sought to decide the best option.
Stigma
IVA is a private agreement between the debtor and the creditor. On April 6, 2009, bankruptcy was no longer advertised in local newspapers, only at London Gazette. Both debtors in the IVA and bankruptcy are publicly listed on the Personal Bankruptcy List - anyone can view the Bankruptcy List but are typically mainly used by credit reference agencies who use them to update credit records (IVA will affect your credit record but this is the same as other debt solutions) , and creditors who will use the Checklist of Obligations to help them make a decision about whether they should lend money to potential customers. Maybe neighbors will not check the Register, which can be a concern people assume when they find out that they will be listed in a public list.
Length
An income-based IVA can often last up to five years, although it can be very long. Homeowners can find that their income under the IVA can be extended for 12 months in lieu of equity, if they have equity in property that can not be released to IVA for the benefit of their creditors.
A bankrupt is usually automatically discharged after a year or less if the bankruptcy is eligible for early release. An income or bankruptcy payment agreement (if applied, depending on individual disposable income) will not last for more than three years and payments are generally much lower than under the IVA based on income.
Getting credit
Unlike bankruptcy, the IVA does not officially restrict the debtor to get the credit, although the proposal can do so. In bankruptcy but can legally obtain credit up to Ã, Â £ 500 without revealing a person's status as bankrupt. After the bankrupt is released there is no law to stop the bankrupt credit runs out.
Ability to trade
Bankruptcy will usually destroy a partnership and prevent the debtor from acting as director of the company. An entrepreneurial merchant should disclose the fact that he is bankrupt when obtaining credit, for example when dealing with suppliers. There is no such implication with the IVA, although lenders often ask.
Credit rating
Although arguably an IVA is seen as more positive than bankruptcy in the eyes of creditors, as it shows a certain commitment to repay debt, in fact the IVA tends to have an equally disadvantageous effect on the credit rating of the debtor as bankruptcy. Usually the credit rating of the debtor is bad before IVA or bankruptcy is considered. Both bankruptcy and IVA will remain on the debtor's credit file for six years from the start of the IVA or bankruptcy.
Cost
There are two separate fees paid in the IVA. Both fees are payable as part of the Arrangement and are included in the monthly contributions made to the IVA. This fee generally does not affect the total amount to be paid, but reduces the final dividend expected by each creditor to be received from the IVA. As a result, the Insolvency Practitioner must approve the costs with the voting creditor before the IVA is accepted.
The cost of nominee is the fee charged in respect of the work performed to the point at which the IVA is approved. This is taken back from payment to IVA before dividends are paid to creditors.
The cost of superiors is a continuing cost in relation to work done during the IVA. It is taken back from payment to the IVA on a regular basis, as agreed by the voting creditor. This can be every three months or every year, depending on the rules set out in individual proposals.
Some debt management companies try to include additional IVA regulatory fees.
House
Perhaps the greatest benefit to IVA over bankruptcy is the control that the debtors may have over their homes. In bankruptcy, the debtor's assets will be attached to the Trustee (some assets are excluded, especially those used as trading tools, household contents). This usually includes the equity in their property and the trustee can force its sale. IVA Proposals may exclude property altogether, or redeem a mortgage or offer a revenue-based contribution for a longer period of time as a substitute for a fair debtor interest in the property. Supervisors may register restrictions on the property to ensure that approval is required before the property is, for example, sold or resold.
Failure
If the IVA fails because an individual can not follow the payment (or approves the new provision with the guardian and creditor), then bankruptcy becomes a real possibility. Because the significant proportion of IVA payments leads to the payment of candidate fees and supervisors, people who fail to get an IVA often find that they are not paying the debt as much as they expect.
In addition, the creditor will also add interest and fees for debts from the meeting of creditors dated to the date of failure (currently 8% per annum), thus increasing the level of debt.
The role of insolvency practitioners
IVA can only be performed by a licensed bankruptcy practitioner. At each stage of the IVA process, the role of the insolvency practitioner changes.
Adviser
The counselor does not have to be an insolvency practitioner, though often so. Counselors should notify the debtor of all available solutions, usually including dealing with first priority debt, mortgaging back, consolidating debt into loans, debt management, bankruptcy, Debt Allowances, and IVA. Counselors should look at all the circumstances of the debtor, what they have, what they owe, and their household income & amp; expenses to give the best solution suggestion. Counselors can charge a fee to seek debt advice or offer it in a charitable capacity where they will not pay for debt advice. Charity debt advice agencies include Citizens Advice Bureau, StepChange Debt Charity, Christian Against Poverty & amp; Debt Support Trustee.
Nominee
If the IVA is considered appropriate, the insolvency practitioner will be nominee. There is a misconception that it is the role of the candidate to advise the debtor on the preparation of a proposal to the creditor. This is not the case. This law is clear that this is the duty of the debtor and his advisor, who may somehow be a nomination company.
Instead, the nomination task is to review the proposals that are required to act, and report them.
In practice, the proposals are generally standardized documents modified for each particular circumstance of the debtor. Common terms include:
Analysis of debtor's income (A) and expenditure (B). From this, disposable income of the debtor is calculated (A) - (B) and this will be the amount to be paid to the IVA periodically (usually monthly). The time period is usually five years, but it can be how long. The proposal will usually state that if disposable income increases during the IVA period, the amount to be paid will also increase proportionately.
A background history explaining how financial difficulties the debtor appears.
Details of any assets that must be realized or excluded. For example, how the house of marriage will be handled, the pension scheme, share the savings scheme, the vehicle, etc.
The ability to call a creditor's meeting in the future if circumstances change, to amend the provisions of IVA.
Limit to get credit. This is because the debt incurred after the IVA approval may result in a bankruptcy petition from the creditor, which will almost certainly cause the IVA to fail.
Chair
The Chairman shall convene a creditor meeting and negotiate with the debtor and creditor to approve the proposal. It is common for creditors to request modifications to the proposal at the meeting. The general modifications filed by major banks include restricting the debtor from obtaining credit, ensuring the payment increases if the debtor's income increases, establishing a minimum refund of 40 pence in pounds, and insisting that the supervisor fails IVA if the debtor misses 3 or more payments, and the petition for bankruptcy of the debtor.
Supervisor
If the IVA is approved, the insolvency practitioner appointed as the supervisor at the IVA who is approved becomes the Supervisor IVA. This involves reporting annually to creditors, debtors and courts. It also involves monitoring that the debtor abides by the terms of the arrangement, approves the creditor's claims, makes payments to the creditors and generally ensures that the arrangement runs in accordance with the terms of the proposal. The debtor must comply with all reasonable requests from the supervisor, which may include providing bank statements, accounts, paychecks, etc. on a regular basis.
See also
- Administration
- Curator administration
- Bankruptcy
- Citizen Advice Bureau
- Company voluntary arrangement (which is equivalent to company)
- Liquidation
- Trust (available in Scotland only)
- Simplified individualized voluntary settings
- Perpetrator pays sole trader
Note
External links
- The Bankruptcy Services Website
Source of the article : Wikipedia
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