WHAT ARE THE PROCEDURES OF AN IVA?
A debtor should approach an IP who
will put together a proposal to put to the
creditors. This Proposal together with a notice
of meeting of creditors will be served on
the debtor’s creditors. It is essential that
the debtor is completely open and honest about
his or her assets and liabilities. Failure
to comply with this can have extremely serious
consequences for the debtor.
The IP will ordinarily instruct a solicitor
to obtain an “interim Order” from the Court.
This will freeze all insolvency proceedings,
by way of example only, bankruptcy Petitions
brought by creditors against the debtor.
During the course of the interim Order, the
IP will call a meeting of creditors. The creditors
will previously have been served with copies
of the Proposal of the IVA. The IP at this
stage would be known as the “Nominee”.
At the meeting of creditors, the Proposal
will be voted on by the creditors. The Proposal
can be amended by either the nominee, the
debtor, or the creditors.
In order to approve the Proposal (amended
or otherwise), the creditors must vote in
favour of the Proposal. The requisite majority
is 75% of voters in value who have had notice
of the meeting of creditors and who are entitled
to vote.
The IVA will only bind creditors who have
had notice of the meeting of creditors. This
means that if a debtor fails to disclose the
existence of a creditor, that creditor will
not be bound by the IVA. That creditor can
then commence insolvency proceedings against
the debtor at any time.
Upon the approval of the proposal, the nominee
will then become the supervisor of the Proposal.
The creditors who do not vote in favour of
the IVA, if the IVA is approved at the meeting
of creditors, will be bound by the terms of
the IVA.
The disadvantage of an IVA to the debtor is
that the debts can linger for years, burdening
future income and still eventually end up
in a bankruptcy. |
