Anyone who is either an undischarged bankrupt, or is in a position to file their own bankruptcy petition, can propose an Individual Voluntary Arrangement (IVA).
The proposals are drafted according to the individual circumstances of the debtor but will consist of contributions from earnings, sale of assets, introduction of third party funds or any combination of these.
Whether or not pressure is being applied by creditors will determine the most appropriate route into the IVA. It may be that our Licensed Insolvency Practitioners recommend that an Interim Order is obtained from the local bankruptcy Court giving the debtor time to put forward the proposals without risk of a Bankruptcy Petition being presented or proceeded with.
A creditors meeting will be held to consider the proposals put forward by the debtor. All unsecured creditors are entitled to vote at the meeting, and 75% of creditors who vote must be in favour of the proposals for them to be binding on all creditors. Creditors can suggest modifications to the proposals but the debtor must be willing for them to go forward for voting purposes.
It is not always necessary to pay creditors in full, and often proposals may provide for a dividend of only 20 or 30p in the £. The creditors should end up in a better position than if the debtor was made bankrupt.
Unlike bankruptcy, this procedure is not advertised and the debtor does not have any of the restrictions of bankruptcy. A company director is not precluded from entering into a Voluntary Arrangement, whereas he or she would have to resign a directorship if a Bankruptcy Order were made against him or her.
Should the debtor not adhere to the proposals after approval the Licensed Insolvency Practitioner appointed to supervise the Arrangement will generally have to petition for the debtor’s bankruptcy.
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