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.

Filed under: BANKRUPTCY

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