The IVA process

IVA’s were introduced by the Insolvency Act 1986 which sets out the rules and procedures to be followed for the process of an IVA.

The act doesn't detail much about what an offer to creditors should include. Any IVA offer is left to the debtor to decide and the creditors can then vote as to whether the offer is acceptable.

One major requirement is that the offer should exceed the amount that the creditors could expect to receive if the debtor was made bankrupt.

The offer to creditors is sent out in a form of a proposal which sets out the financial circumstances of the debtor and explains the reasons why an IVA should be considered.

The IVA proposal also includes a calculation showing the return that creditors can expect from the IVA, after costs, and will make a comparison with the amount of return that could be expected in a bankruptcy.

When the IVA proposal is sent to creditors a notice is also sent to them to convene a meeting of creditors. This is usually held at the offices of the insolvency practitioner but generally creditors do not attend and they send their vote in by post.

In order for the IVA proposal to be approved 75% of creditors who vote must agree to the proposal. This is quite different from 75% of all creditors and is relevant because a number of high street lenders have a policy of never voting. Providing at least 75% of voting creditors ( by value of debt ) approve the proposals the IVA becomes effective and its terms are binding on all creditors even if they voted against it.

At the point where creditors vote they are also given the option of voting in favour of the proposal with modifications. If the debtor agrees to the changes the vote will be counted as one in favour of the proposal. If the debtor cannot agree to the changes then the vote will be taken as against the proposal.

Because the debtor will have to decide whether to accept any suggested modifications the debtor should attend the meeting of creditors but, if that is not possible, at the very least should be available by phone or email to confirm their decision.

When the IVA is approved by creditors the insolvency practitioner will be appointed Supervisor of your voluntary arrangement. It will then be his responsibility to ensure that everything agreed in the IVA are complied with and he will report to creditors as agreed and also will make payments to creditors on your behalf.

You will not have to deal with your creditors again and there should be no reason why they should contact you. When the term of the IVA finishes, provided that you have complied with the terms of the IVA, the insolvency practitioner will report to creditors and his appointment will end. You will then be debt free.