Individual Voluntary Arrangements (IVA's)

BANKRUPTCY IN THE UK

Individual Voluntary Arrangements (IVA's) are a formal alternative for individuals wishing to avoid bankruptcy.

• The IVA was established by the Insolvency Act 1986 and constitutes a formal repayment proposal presented to a debtor's creditors via an Insolvency Practitioner. Usually (but not necessarily) the IVA compromises only the claims of unsecured creditors, leaving the rights of secured creditors largely unchanged.
• An IVA is a contractual arrangement with creditors and can be as flexible as an individual's own circumstances; they can therefore be based on capital, income, third party payments or a combination of these.
• Creditors take a decision at a creditors' meeting called to consider the IVA proposal. The return to creditors is often higher than they would receive in bankruptcy. A vote is taken - by value. More than 75% in value of those creditors who vote at the meeting by person or by proxy must agree in order for the arrangement to be approved. If any of those voting are 'associates' (usually business associates, friends and family) then a second count is taken and 50% of non-associated creditors must approve it.
• In the UK, an increasing number of consumer debtors with overwhelming levels of debt are turning to specialist debt advice organizations that offer an alternative to bankruptcy via the use of an Individual Voluntary Arrangement.
• 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 IVA's can only be proposed whilst the bankrupt is un discharged. 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.

In the United Kingdom (UK), bankruptcy (in a strict legal sense) relates only to individuals and partnerships. Companies and other corporations enter into differently-named legal insolvency procedures: liquidation, Administration (insolvency) (administration order and administrative receivership). However, the term 'bankruptcy' is often used (incorrectly) when referring to companies in the media and in general conversation. Bankruptcy in Scotland is referred to as Sequestration.

• A Trustee in bankruptcy must be either an Official Receiver (a civil servant) or a licensed insolvency practitioner.
• Following the introduction of the Enterprise Act 2002, a UK bankruptcy will now normally last no longer than 12 months and may be less, if the Official Receiver files in Court a certificate that his investigations are complete.
• It is expected that the UK Government's liberalization of the UK bankruptcy regime will increase the number of bankruptcy cases; initial Government statistics appear to bear this out. It remains to be seen whether the legislation will need reviewing if this remains the case.
• There were 20,461 individual insolvencies in England and Wales in the fourth quarter of 2005 on a seasonally adjusted basis. This was an increase of 15.0% on the previous quarter and an increase of 36.8% on the same period a year ago.
• This was made up of 13,501 bankruptcies, an increase of 15.9% on the previous quarter and an increase of 37.6% on the corresponding quarter of the previous year, and 6,960 Individual Voluntary Arrangements (IVA’s), an increase of 23.9% on the previous quarter and an increase of 117.1% on the corresponding quarter of the previous year.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.