An Individual Voluntary Arrangement (IVA) is a formal alternative for individuals wishing to avoid bankruptcy.
An IVA is an alternative to bankruptcy, however they are not mutually exclusive. A person can propose an IVA after they have been made bankrupt. If an arrangement is approved post-bankruptcy then the debtor can apply to the Court for an annulment of the bankruptcy order – such IVAs can only be proposed whilst the bankrupt is undischarged. If an IVA is proposed after a bankruptcy order has been made, it is now also possible to nominate the Official Receiver to be the supervisor of the arrangement. The Arrangements offered by the Official Receiver are very restricted and have not proved very popular. This type of arrangement is called a Fast Track Voluntary Arrangement and is only suitable in certain cases.
The analogous procedure for businesses is the Company Voluntary Arrangement.In an IVA, the lenders erase part of the money owed and the creditors must make a fixed agreeable monthly payment every month for a given time.The Government has made it clear that it soon hopes to allow easier access to Individual Voluntary Arrangements (IVA), today’s number one and fastest growing alternative to insolvency
This plan for an easier to obtain IVA is in effect from the last few years .
The changes hope to make a law that requires only 51% of the lenders who are owed debt to give approval for an IVA. Currently, 75% of the lenders for one’s debts must approve for an IVA. This 51% rate would only apply on debts below £75,000. This new plan would also make it quicker to file an application for an IVA and involve less paperwork.
Charles Howson, chief executive of Accuma, a personal insolvency specialist, said: ‘The existing laws are outdated and don’t apply to the vast majority of people applying for an IVA today. These rule changes would simplify the process and make taking out an IVA more viable for people in debt.’
There were over 47,000 bankruptcies this year and the easier process for filing an IVA is an attempt to help reduce this number.
Around 20,000 people filed for IVAs this year and it is expected that a total of 30,000 will file for an IVA this year.
One of the main benefits is that creditors cannot get your home while you are on an IVA.