In legal terms, “Individual Voluntary Agreements,” or IVAs, denotes court proceedings wherein individual debtors unable to maintain financial obligations submit partial repayment proposals for creditor approval. Primary motivation for IVA encompassment in 1986 Insolvency Act legislation is providing a bankruptcy alternative. Part of the IVA process involves debtor preparation of a written proposal for partial repayment to current creditors. This mandatory task is typically performed with assistance from the Insolvency Practitioner. Subsequent default by the debtor triggers IVA invalidity and potential necessity to declare bankruptcy.
Beneficial IVA Aspects As Opposed to Bankruptcy
Excessive debt often looms large in every area of a beleaguered borrower’s life. This is to be expected amid daily arrival of daunting letters, constant debt collector phone calls, and rapidly rising balances built from late fees with compounded by already astronomical interest rates. Not to mention prospects of losing valuable assets in foreclosure or repossession. Thus, it is hardly a surprise that overwhelmed debtors often seek safe harbours of IVA havens. Doing so allows debtors to devise a plan for revised repayment of reduced balances that better fits current budgetary resources. Even better is immediate relief from constant pressure caused by living in fear of imminent homelessness or having no transportation. Still another huge bonus is legal exemption of certain assets from involuntary seizure for debt liquidation, even if subsequent bankruptcy declaration does occur. Formal bankruptcy, however, affords far less financial liberty because of much higher economic exposure by losing many more valuable assets to repay debts.
Proper Insolvency Practitioner Role
Pursuant to Insolvency Act of 1986 provisions, IVA establishment requires engaging a professional Insolvency Practitioner. Presently, the sole organization charged with Insolvency Practitioner licensure is the Insolvency Practitioner Association, or IPA. Thus, IPs serve various functions at differing phases of the IVA process. Among many “hats” they wear are nominee, supervisory, chairperson, and even adviser.
Wide Diversity of Insolvency Practitioner Duties
As advisers, IPs (or parties acting as IP) evaluate debtor income, assets, liabilities, recurrent expenses, and other relevant factors to calculate reasonable figures for monthly IVA debt repayment. As nominee, an IP reviews and thoroughly analyzes the debtor’s proposed repayment plan and has the option to offer assistance, if necessary. Their intervention is often required to make needed adjustment to account for priority debts and IP fees. An IP Chairman presides at preliminary IVA meetings between creditors and debtors to compile creditor votes in favor of or opposing proposed repayment plan, then formally pronounce its validity via powers vested by law. After IVA approval and final ratification, the IP assumes a managerial role of facilitating prompt debtor payments and arranging meetings to advise concerned parties as to IVA changes and status.
Legally mandated IP involvement irrespective of IVA outcome attracts debtor liability for legal fees. Individual Voluntary Arrangements involve two basic fee categories: supervisor and nominee fees. As the latter cover expert assistance provided before creditors receive IVA proposal, debtors pay those costs irrespective of individual creditor votes. By contrast, however, Supervisor fees are recurrent and based on specific IP services rendered at pre-specified intervals. Common examples of events that trigger Supervisor fee payment are periodic analyses of debtor finances, prompt IVA payment oversight. and creditor advice of any required or beneficial adjustments that could impact creditor interests.
Obvious Conclusions and Closing Observations
In Individual Voluntary Arrangements, debtors have far more economic liberty and much more flexible financial options for comfortable debt repayment via reorganization. At the same time, however, they may proceed toward affordable accelerated debt elimination without fear of losing valuable assets, personal possessions, or freedom to engage in commerce freely. To a large degree, this inherent dynamic of every IVA operates to transform Insolvency Practioners into functional equivalents of goodwill ambassadors. At least insofar as finances are concerned. This phenomenon is inevitable, given fundamental adversarial character of IVA cases. While it is quite obviously in a creditor’s best interests to receive maximum payment, the converse is just as apparently correct from the debtor’s perspective. Despite this, both sides have mutual interests such as minimizing economic damage. Bankruptcy is likely to net creditors next to nothing but deprive debtors of prized possessions. Thus, efforts of compromise and conciliation to coordinate equitable IVA debt repayment are well worthwhile for both sides of otherwise irreconcilable economic disputes.