What is an IVA?

Consumer spending in the United Kingdom has reached levels which are out of proportion to the average incomes of an increasingly large level of her citizens.

This situation has brought with it a rapidly growing number of consumers with levels of debt that are above their ability to pay. More and more individuals are turning to specialist debt consolidation and advice organisations offering protection from personal bankruptcy via the use of an Individual Voluntary Arrangement (IVA).

IVA is a formal version of the arrangement where a debtor makes a formal proposal to his creditors to pay of part of or all of their debts. In order to receive an IVA the debtor needs to apply to the court and has to hire the services of an insolvency practitioner. Upon succeeding to reach an agreement with their creditors, the creditors will be legally bound by it.

Therefore the first stage for the debtor is to find authorised insolvency practitioner to act on their behalf. Local courts can give the names of local practitioners as well as nay of the many debt consolidation service companies throughout the U.K.

As soon as an insolvency practitioner has been appointed, they will apply to the court for what is known as an “interim order,” preventing creditors from presenting a bankruptcy petition while the interim order is in force. In addition the same interim order prevents creditors from taking any other action without the court’s permission.

The role of the insolvency practitioner is then to relate to the court the details of his client’s proposals and to arrange a creditor’s meeting of creditors to consider them. The date of the meeting and repayment proposal details are sent to the creditors, with only those who had notice of the meeting are bound by the arrangement. In the even that not all the creditors have been informed of the meeting, then any arrangement arrived at there will probably fail.

Creditors who attend the meeting vote on whether to accept the repayment proposals. To allow the agreement to become binding more than 75% of the holders of the total debt value, which may not relate to the number of the creditors who are present either in person or by proxy, must vote in favor.

The insolvency practitioner then is appointed as supervisor for the arrangement and arranges payment to the creditors in accordance with the accepted proposal.