Individual Voluntary Arrangements

Individual Voluntary Arrangements (IVA) is a formal procedure used by an individual in financial distress to come to an arrangement with the creditors.

The Corporate Recovery and Insolvency team at Chadwick Lawrence LLP offer a realistic commercial solution to all of your business and personal financial affairs.

With varied experience and expertise in all aspects of both corporate and personal insolvency our team, who work closely with licensed Insolvency Practitioners, can offer you a strategic answer to solving and re-structuring your financial affairs in a reliable and cost effective matter.

What is an IVA?

An IVA is a procedure that allows an individual to:

• Alleviate creditor pressure by setting out a clear and affordable repayment plan that both the debtor and the creditors find acceptable.

• Once agreed, this will halt any creditor action and allow the debtor to make affordable monthly contributions in order to repay what they can.

• An IVA must be approved by 75% of creditors by value and will be managed by a licenced and regulated Insolvency Practitioner acting as a Supervisor.

Following payment of the final instalment and providing the terms of the arrangement have been adhered to, the remainder of the debt will be written off and the debtor will be free to carry on unencumbered from their previous liabilities. Typically an IVA will last around 5 years, though this can change depending on various factors.

When to use an Individual Voluntary Arrangement

An IVA is a flexible way of legally managing individual debt and can drastically improve the lives of debtors by removing creditor pressure and allowing them to repay what they can afford over a period of time.

Certain factors will be considered by the Supervisor:

• The debtor has sufficient income to bear the financial cost of the monthly contributions in addition to other monthly expenses such as household expenditure

• The debtor must owe money to at least 2 creditors, in order for a valid vote to take place and a majority decision to be made. An Insolvency Practitioner will also take into consideration the amount of money owed by the debtor, as IVAs are most effective for total debts exceeding £10,000 or where there are numerous creditors.

What are the benefits of an IVA?

• Provided that all terms of the agreement are abided by arranging an IVA will halt unsecured creditor action and help alleviate pressure
• The use of an IVA prevents creditors who are threatening the use of Bailiff action.
• An IVA will allow repayments to be made based upon what is affordable for the debtor and acceptable for the creditors.
• The debtor will often be able to retain possession of their home and mortgage repayments are factored into the equation when determining affordability, depending upon available equity.
• Any remaining debt at the end of the repayment terms will be legally written off.
• The repayments involved in an IVA will be consistent and regular, allowing for easy budgeting and financial planning.

What are the disadvantages if an IVA?

• Some debts are not included, such as; Student loans, fines, secured debts and Child maintenance payments
• An IVA may negatively impact your credit rating
• You may need to try and re-mortgage your home towards the end of the arrangement if there’s equity in your home.
• An IVA is subject to the approval of the Creditors, if they do not approve they can block the IVA’s implementation.

What next?

Our specialist lawyers in the Dispute Resolution team at Chadwick Lawrence would be delighted to discuss matters with you to allow them to gain a complete understanding of how we can assist your business.

If you would like to receive some further information, please call 0113 225 8811 or e-mail zoeallen@chadlaw.co.uk