An Individual Voluntary Arrangement (IVA) is a formal alternative to bankruptcy. IVAs can come about through a referral from Courts where there are assets exceeding £2,000, or by an Official Receiver if during bankruptcy it is subsequently found that an IVA is more appropriate. The other route to an IVA individual voluntary arrangement would be to approach an Insolvency Practitioner direct.
IVAs are formal repayment arrangements that are negotiated and supervised by insolvency practitioners (authorised accountants and solicitors), to achieve one or both of the following:
There is no minimum amount available for distribution to creditors, but it should be borne in mind that the costs of IVAs can range from £3,000 to £7,000 or more, plus VAT and expenses.
IVAs are not suitable for everyone. Since April 2002, Insolvency Practitioners are required to provide a leaflet 'Is a voluntary arrangement right for me?' before asking a debtor to commit to the programme.
The advantages of Individual Voluntary Arrangement are that they are binding on creditors when agreed, they can be tailored to suit the debtors circumstances, they are not advertised, there is no investigation or publicity involved, business activities will continue as normal, creditors will be bound by the voluntary arrangement and may be paid more than in bankruptcy, and the home does not have to be lost.
The disadvantages are that IVAs can be costly, creditors can refuse to accept an IVA which does not include the home and assets, the debtor can still be made bankrupt if the IVA fails, IVAs are registered on a public register which may jeopardise further credit applications.