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INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)


INTRODUCTION IVA is generally a preferred option to bankruptcy, when an individual has been unable to get his or her creditors to accept an informal agreement.

An IVA is a formal arrangement made between an individual and the majority of his or her creditors and creates a legally binding agreement between them.

THE IVA PROCESS * An insolvency practitioner (IP) is required to act in the IVA, who will draw up a proposal for the individuals creditor's and the court. In this proposal an offer of repayment is calculated in-readness to be put before the debtors creditors.

* Until and unless the IVA is approved, an in-trim order is normally applied for to stop any other enforcement    action. This application will be submitted to the debtors residual county court. The in-trim order lasts for 14    days.

* Providing the court have not rejected IP's (now called the nominee) recommendations when received, the    courts will extend the length of the in-trim order. The nominee will then arrange a creditors meeting.

* At the meeting the creditors will consider the proposal and vote on it. The proposal must be approved by 75    per cent (to value) of the creditors voting.

* If the proposal is approved it is binding immediately, normally at this point the nominee is appointed as the    supervisor of the IVA. A report of the meeting is sent to court, the court then records the effect of the report    and discharges the in-trim order.

* Providing that no challenges are made to the IVA the supervisor will implement it.

ADVANTAGES OF AN "IVA"

1. Less stigma involved than bankruptcy.
2. If debtor has a company he or she may continue trading.
3. Creditor should receive higher payments than in bankruptcy.
4. Unsecured creditors voting against the IVA are bound by the agreement.
5. Debtor can still be a director.
6. Debtor may be in a profession that does not allow bankrupts.

DISADVANTAGES OF AN "IVA"

1. If the in-trim order is rejected, debtor can not reapply for another 12 months and may lose any up front     fees paid.
2. Can pay higher amounts, over a longer period, than in bankruptcy.
3. The cost of an IVA may be relatively high and may have to be paid in-advance.
4. Assets may be at risk, including family home, if they have not been excluded by the creditors.
5. Debtor may still be made bankrupt if the IVA fails.
6. Any changes to the debtors circumstances may lead to failure of the IVA.
7. IVA's are a matter of public record.


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