Over our years of working within insolvency, we have been asked many questions by people looking for an alternative to Bankruptcy or who are already Bankrupt but don’t want to continue to be. When designing this website, we thought that it would be best to summarise those queries that have been raised most frequently. If you have a question that you would like to ask, please contact us. We will be happy to reply to you directly and keep this page updated.
What exactly is an Individual Voluntary Arrangement ?
If you live in England and Wales then you can put forward a proposal to your creditors to pay off all or part of your debts over an agreed period.
You don’t have to pay all of your debts ?
Correct. If creditors agree with your proposal then they may accept repayment of just a fraction of their debts, if that’s the best that you can do.
Really ? What if not all creditors agree ?
The insolvency law is very clear. Creditors get to have a vote and if there is a certain majority that agree with your proposal then those who said no must go along with the plan anyway.
What is the majority I need for creditors to accept my proposal ?
Creditors’ votes are in proportion to the size of their debts. So, if you owe someone £1,000 and someone else £10,000, the person you owe £10,000 has 10 x the voting power of the creditor owed £1,000. You need to have over 75% voting in favour of your proposal.
Is that 75% of all my creditors ?
No. It’s 75% of those creditors who bother to vote. If a creditor doesn’t vote, then they must go along with the decision of those that do.
I owe my family a lot of money. Can they sway the vote in my favour ?
Initially yes. They count towards the 75% you need to achieve. The law, however, doesn’t want family or “associates” to outweigh the other creditors’ views. It makes sense, as otherwise a debtor might invent or increase a debt to push their proposal through. We’ve seen it tried !
So, the law says that once the 75% majority has been achieved, a second vote must take place where family or connected creditors mustn’t count. This time though you only need a simple majority: more than half voting in favour.
Is an IVA a legal process ?
Yes. Your proposal is lodged with the Court and you need an IP, like Sadlers, to help you with the process.
What will you do ?
At first we will act as the Nominee in relation to your proposal. The Nominee’s job is to review and comment on whether the proposal is likely to work and whether it’s fair to creditors.
So you will be acting for me then ?
Not exactly. The Nominee will often help with writing your proposal. It will be quite a lengthy legal document. However, the Nominee is an Officer of the Court and must balance what you want to achieve with the rights of creditors. Sometimes the Nominee will introduce you to a solicitor who will help with the proposal and they will likely act for you.
What do you do after the proposal is drafted ?
The Nominee will send the proposal to creditors and set the time and date for creditors to vote. If the proposal is agreed the Nominee will usually become the Supervisor, but creditors can choose another IP.
What does a Supervisor do ?
The Supervisor’s job is to oversee the smooth running of the IVA.
What are the benefits of me doing an IVA ?
There can be many advantages over going Bankrupt. If you put forward the “best” plan for creditors in your circumstances, then you may not have to pay all your debts in full. You may also be allowed to keep some of your assets and choose which ones get sold, when and in what order.
Being in an IVA doesn’t stop you becoming or carrying on as a director too. Certain jobs don’t allow you to be Bankrupt and, therefore, an IVA is often the best solution if you’re in debt.
Can the creditors negotiate ?
Yes . A creditor can put forward a modification to your proposal. They might suggest that you do something to increase your offer or just do whatever you’re already proposing quicker. You don’t have to accept the modification but if you don’t it’s likely that that creditor’s vote will be counted as a vote against your original proposal. If you’re happy to agree to the modification then the other creditors will get to vote on it too.
What’s in it for creditors in accepting just some of their money back ?
Bankruptcy is costly for creditors. The Government effectively takes a tax on money realised from selling your assets and the Official Receiver will be involved before your Trustee is appointed. This all adds up and creditors might not see much, if anything, in return even if you have some assets. If you can put forward a deal that reduces costs and is a better outcome then creditors will probably accept it.
If I put forward a better deal than Bankruptcy do creditors have to accept it ?
Unfortunately not. It’s each creditor's own decision and sometimes they can be uncommercial and ignore the money being offered.
Is there a down side to an IVA ?
Certainly. They’re not perfect. Your name goes on a register, although it’s not publicised more widely than that. Sometimes you’ll find it difficult to get credit. We will explain the difficulties we can see in your specific situation, as well as the benefits, when we meet.
What if I don’t do what I say I’m going to ?
If you don’t stick to the terms of your proposal then you may still be declared Bankrupt, so it’s important to know what you’re getting into. However, if your circumstances have genuinely changed you may be able to put forward a variation, or series of variations, to your proposal. Creditors will get to vote again every time you want to alter your proposal.
Can I leave a debt out of my IVA ? They are my friend.
Not without the agreement of the majority of the other creditors. You will need to declare the debt and explain why that creditor should be treated differently from everyone else. Friendship is unlikely to be an acceptable reason, but a critical supplier may well be.
Do I have to tell all my creditors I’m going to propose an IVA ?
Yes. You should tell your Nominee about all your creditors and they must notify them.
I don’t have many assets but I do have a steady income. Can I do an IVA ?
Yes. There is no one-size-fits-all IVA and the proposal will be written to fit your circumstances.
Something we’ve not covered yet ? Send us a query via our contact page and we’ll answer you and add it to this section too.