Your Questions on Individual Voluntary Arrangements
What is an Individual Voluntary Arrangement (IVA)?
An IVA is an alternative to bankruptcy and is an arrangement between a debtor and his creditors, to pay a dividend over a set period of time, normally three to five years.
IVA’s are binding on all creditors (even those that dissent) provided that in excess of 75 per cent of creditors voting in person or by proxy, vote in favour of the IVA.
The implementation of an IVA triggers a moratorium providing the individual with protection from his or her creditors over this period.
Who is the Nominee/Supervisor?
A Nominee is appointed by the debtor prior to the proposal being accepted. If the proposal is accepted then the Nominee becomes a Supervisor.
What is a moratorium?
A moratorium is an order that protects the individual from all proceedings and enforcements, whilst his/her proposal is prepared and put before creditors. Should the proposal ultimately be agreed by creditors, the moratorium lasts until the IVA is concluded.
What should be included in a proposal?
• why creditors may be expected to concur with such an arrangement
• details of the assets with an estimate of their respective values
• whether the assets are charged in favour of creditors
• the extent (if any) to which particular assets are to be excluded from the voluntary arrangement
• any assets, other than assets of the individual themselves, which is proposed to be included in the arrangement
• the nature and amount of the individual’s liabilities including the manner is which they are proposed to be met.
• claims or potential claims due to transactions at an undervalue, preferences or extortionate credit transactions.
• proposed duration of the arrangement and estimates of the dividend.
• if the individual has a business, the manner in which it is proposed to be conducted during the course of the arrangement.
What is a Nominee’s report?
The nominee’s report expresses a view as to whether, in the opinion of the nominee, the voluntary arrangement has a reasonable prospect of being approved and implemented by the individual’s creditors and whether a meeting of the individual’s creditors should be summoned to consider the proposal.
When can a creditors’ meeting be held?
Once the proposal and the nominee’s report are lodged in court, notice of the meeting must be sent to every creditor giving not less than 14 days and not more than 28 days notice to attend.
How many creditors need to approve an IVA proposal?
The IVA proposal needs to be accepted by in excess of 75 per cent by value, of creditors voting in person or by proxy who are not associates of the individual.
Which creditors are bound by the proposal?
The proposal will bind all creditors who were entitled to vote at the creditors meeting, whether or not they had notice (subject to certain exceptions).
Will I have to pay money each month to the Supervisor?
Depending upon the individual’s circumstances, the amount payable is usually based upon monthly income after deducting essential costs of living. In certain circumstances it is possible to make one lump sum payment (this is usually provided by family or friends).
What powers does a Supervisor have?
In addition to the powers defined in the proposal, the supervisor has the power to apply to court for an order in respect of transactions defrauding creditors, the power to present a bankruptcy petition and the power to apply to court for directions in the event of any issues that arise during the period the IVA is in progress.
What can go wrong?
The Supervisor will usually have to present a bankruptcy petition if the following occur:
• a failure to comply with obligations under the voluntary arrangement
• the giving of false or misleading information or making a material omission in any document at the creditors meeting, and/or
• a failure to comply with the supervisor’s reasonable requests.
Is an IVA better than bankruptcy?
Most credit-rating references do not distinguish between the two, however although the stigma of bankruptcy is becoming less of an issue, most debtors would be willing to pay a monthly contribution in order to avoid bankruptcy.
|
