An Individual Voluntary Arrangement ("IVA") is very similar to a CVA.

 A debtor, either as an individual or in conjunction with other debtors (e.g. a partnership) will make a proposal to his or her creditors. Typically this proposal will contain an offer to the creditors to pay only a percentage of the debt (a dividend). In some cases the full debt may be paid but this will typically be much later than when the debt would ordinarily be due to be discharged.

 In many cases the IVA will contain a proposal whereby the debts would be discharged to the creditors over a period of time. This cannot be more than five years. In these circumstances, the IVA will make provision by way of the Proposal whereby the debtor will make contributions from his income as well as any contribution at the commencement of the IVA from any capital which the debtor may possess.

 It is common in IVAs for certain capital assets to be excluded from the IVA. One of the important benefits is that the debtor can (provided that the proposal which is accepted by the creditors makes provision for this) continue to live in his or her home so long as the debtor complies with the terms of the IVA. If the debtor fails to comply with the terms of the IVA Proposal, then the Proposal ordinarily will contain a provision whereby the Insolvency Practitioner (IP) who has conduct of the Proposal (who is known as the Supervisor of the IVA) is contractually obliged to Petition for the bankruptcy of the debtor. Alternatively, it is possible to return to the creditors in order to make other arrangements.

Filed under: BANKRUPTCY

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