An IVA is a tailored proposal by a debtor to his creditors to repay debt over an extended period of time. Typically, up to 75% of debt can be written off.
The debts to be included in the IVA will be both business debts and any other unsecured borrowing such as credit card debt or bank loans.
Trade or certain trade suppliers can be excluded from the arrangement.
An IVA has to be done through a Licensed Insolvency Practitioner. Up to the date of the creditors meeting he is known as the 'Nominee'. From the creditors' meeting date he is called the 'Supervisor'.
A detailed proposal will be forwarded to the creditors. In practice, this is prepared by the Insolvency Practitioner.
A meeting of creditors will be called - approximately 6 to 8 weeks from the first contact with us.
An IVA needs the approval of 75% of creditors voting at the creditors meeting to be successfully implemented. This will bind all creditors.
Immediately, the payment of unsecured creditors will stop. A manageable budget is agreed. A regular monthly sum that can be afforded is paid to the Supervisor.
An IVA is not bankruptcy - the bankruptcy restrictions do not apply. For example, a director of a limited company can continue to act as such through an IVA.
The trade can continue - however, it is vital to assess the reasons for the financial problems - there is little point in continuing to trade a loss making business.
Any unpaid debts after completion of the arrangement will be written off.
Court protection from creditors can be obtained. An IVA only deals with unsecured creditors. Secured creditors such as a mortgage provider will need to be paid as normal.
In most IVA's it will not be necessary to sell the family home.
What is the proposal and what should it contain?
The proposal is the written contract given to all creditors of the debtor to examine, discuss and formally vote on at the creditors meeting. When approved, this proposal becomes legally binding. The main contents of the proposal are;
- A brief explanation behind the financial difficulties, giving particular attention to reasons
why the trade can be successfully continued should that be the debtor's intention. - Trading background.
- The precise proposals put forward by the debtor - what instalments are proposed/how any equity in the home is to be dealt with etc.
- A summary of the debtor's financial position, identifying the business debts and assets.
- Trading budgets and cashflow forecast.
- An indication of dividend payments and the timing of those payments.
- A monthly income and expenditure account detailing the debtor's household income and expenditure.
- A comparison between the outcome of the IVA compared to bankruptcy.
- Valuation of the home where appropriate.
In practice, of course, we will draft these proposals following detailed discussions with the debtor.
What happens at the Creditor's meeting
In practice it is unlikely that any creditors will actually attend the meeting. They are likely to vote by proxy prior to the meeting.
Sometimes 'modifications' can be put forward by the creditors. These need to be agreed by the debtor and may be the subject of negotiation, by telephone, on the day of the meeting. We will, of course, conduct any such negotiations on the debtor's behalf.
To assist with the approval of the proposals the Nominee can allow up to a 14 day adjournment of the meeting.
For more information on IVAs, both consumer and business, please go to our brochure services and download our pdfs.
