Individual Voluntary Arrangements (IVA)

Individual Voluntary Arrangements (IVA): A Flexible Alternative to Bankruptcy

As a director of a UK company, if your business is struggling or has failed, you might find yourself facing significant personal debts due to personal guarantees, overdrawn Directors Loan Accounts, or other liabilities. While Bankruptcy is an option, it’s not the only one. An Individual Voluntary Arrangement (IVA) offers a more flexible, legally binding agreement with your creditors, allowing you to avoid bankruptcy while still addressing your debts.
My extensive experience, having dealt with insolvency related cases for over 36 years, includes advising individuals on the suitability of IVAs. It’s often a preferred solution for directors who want to avoid the harsher restrictions of bankruptcy and potentially retain certain assets.

What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you (the debtor) and your creditors to repay your debts over a period, typically 5 or 6 years. It is a form of personal insolvency but is generally less restrictive than bankruptcy.
Key features of an IVA:

• Managed by an Insolvency Practitioner: An IVA must be proposed to and supervised by a qualified Insolvency Practitioner (known as the Nominee/Supervisor).
• Creditor Approval: Your proposal outlining how you intend to repay your debts (e.g., monthly payments, lump sum from asset sale) must be approved by at least 75% (by value) of your creditors who vote. Once approved, it is legally binding on all unsecured creditors, even those who voted against it or didn’t vote at all.
• Protection from Creditor Action: Once an IVA is approved, creditors cannot take further legal action against you (e.g., demanding payment, pursuing bankruptcy).
• Avoids Bankruptcy: An IVA allows you to avoid bankruptcy and its associated restrictions and stigma.
• Potential for Asset Retention: You may be able to keep certain assets, such as your home (subject to equity release provisions), which might otherwise be lost in bankruptcy.
• Monthly Payments: You typically make affordable monthly payments based on your income and expenditure.

Why an IVA Might Suit a Director
Directors often find IVAs a more appealing option than bankruptcy for several reasons:

• Avoid Director Disqualification (Directly): While an IVA itself doesn’t prevent you from being a director (unlike bankruptcy), it can resolve the underlying debts that might have led a Liquidator to petition for your bankruptcy, which would lead to disqualification. It also helps avoid the public record of bankruptcy.
• Retaining Control: You retain more control over your assets and finances compared to bankruptcy.
• Protecting Professional Reputation: While an IVA is listed on the Insolvency Register, it is generally viewed more favourably than bankruptcy by professional bodies and credit providers.
• Flexibility: The IVA can be tailored to your specific circumstances and income, and it can include arrangements for contingent debts like personal guarantees.
• Avoiding Public Scrutiny: An IVA involves less public scrutiny of your financial affairs than bankruptcy, which involves an Official Receiver investigation.

Consequences of an IVA
While less severe than bankruptcy, an IVA still has consequences:

• Impact on Credit Rating: Your credit rating will be severely affected for the duration of the IVA and typically for a year or two after it concludes.
• Public Record: Your IVA will be recorded on the Insolvency Register, which is publicly accessible.
• Binding Agreement: You are legally bound by the terms of the IVA. If you fail to keep up payments, the Supervisor may petition for your bankruptcy.
• Professional Implications: While generally better than bankruptcy, some professional bodies may still require you to declare an IVA.
• Asset Equity: If you own a property, you may be required to release equity from it towards the end of the IVA to pay creditors.

My Guidance: Is an IVA Right for You?
An IVA can be an excellent solution for directors with significant personal debts who want to avoid bankruptcy and its associated restrictions. However, it’s crucial to seek expert advice to determine if it’s the right solution for your specific circumstances and whether you can realistically adhere to the terms.
I can assist you by:

• Assessing Your Eligibility: Determining if an IVA is a suitable option given your debts, assets, and income.
• Developing a Proposal: Helping you prepare a detailed and realistic IVA proposal for your creditors.
• Negotiating with Creditors: Liaising with your creditors to secure approval for the IVA.
• Explaining the Process: Guiding you through every step of the IVA, from proposal to completion.
• Providing Crucial Support: Offering straight talking, supportive guidance during what is undoubtedly a highly stressful and challenging time, ensuring you understand the pros and cons.

Don’t let personal debts overwhelm you. An IVA could provide a structured path to a fresh start without the full impact of bankruptcy.

If you want to find out anything further about this topic then please feel free to call me on 0330 236 9937 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com.

______________________________________________________________________________________________

This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.