o avoid bankruptcy, individuals who do not find any other alternative which can help them to pay off their debts, enter into Individual Voluntary Arrangements or IVA. The arrangements, rules and regulations that are in force for this process, were put forth in the Insolvency Act, 1986. With this arrangement, a debtor takes the help of insolvency practioners and puts forth to his or her creditors, a proposal that includes payments that the debtor can afford to make in future against sums that are owed. This IVA has to be honoured, and payments have to be made by the debtor, as agreed; failing this, the IVA is nullified, and the debtor faces possible bankruptcy.
IVA versus Bankruptcy
When a person is in debt its a very stressful situation, made worse by the constant calls of creditors, the debt continuing to increase due to late payment charges and the fact that assets could then be at risk, if a proper plan to settle the debts is not amicably arrived at. For reaching agreement on an IVA, the debtor needs to be sure of the amount that he or she can comfortably pay, with known sources of income and this can temporarily reduce the animosity that is there in dealings with creditor. In this agreement a debtor can exclude assets and properties from seizure, so that even if the IVA is not fully honoured, these assets cannot be seized, even if the next step is bankruptcy. when a person opts for bankruptcy, such protection is not normally available, and any property or assets can be seized to help the paying of debts.
When a debtor needs to make an IVA as governed by the Insolvency Act of 1986, it is necessary that services of an insolvency practitioner be taken. IPA or Insolvency )Practitioners Association is the only body that has the authority to issue licenses to insolvency practitioners. These licensed practitioners act for the debtor throughout the entire process. They can act as supervisors, chairmen, nominees or advisers.
Insolvency Practitioners- Their Roles
When the practitioner assumes the role of an adviser, he or she will make an assessment of the income of the debtor, debts, expenditure, properties and all other financial matters that will help the adviser to make an informed estimation of the amount of money that the debtor can spare to make the restitution of debts. When the practitioner is appointed as a nominee, the draft arrangement for debt repayment will be analyzed and scrutinized and changes suggested to make it more realistic so that priority creditors and fees to the practitioner are taken into account. As a chairman, the insolvency practitioner will preside over meetings between the creditors and the debtor, ensure that a proper vote is taken in favour of or against the proposed draft, and further ensure that action decided on is enforced through legal means at the practitioners disposal. Once such an IVA agreement is accepted by the creditors, the practitioner then becomes a supervisor, who has to ensure that the debtor makes the promised payments and also calls for meeting with creditors to inform about the progress or any changes required to be made in the IVA.
Fees and the IVA
The IVA process does need the services of an insolvency practitioner whether it succeeds or fails, and this does need legal fees to be paid during the process. There are two types of fees that don need to be paid for such an IVA. They can be fees paid to a nominee and those made to a supervisor. The editing and preparation of the draft need for fees to be paid to the nominee. These fees have to be paid even before the draft is presented to the creditors, and will have no bearing on how they vote to accept or reject the proposal. Once the Individual Voluntary Arrangement is in force, the supervisor has to be paid at regular intervals for overseeing the regular disbursement of payments, analyzing the financial situation of the debtor, and making changes in IVA if necessary and arranging meetings with creditors to give progress or ask for changes.
Once an IVA is entered into, debtors get a lot of flexibility and freedom in paying off debts, and the fact that they do not lose their trading power or assets reduces their risks. The insolvency practitioner will throughout the entire process ensure that debtor complies with the obligations laid down in the agreement and also preside over meetings with creditors. In case a debtor fails to meet these obligations, the practitioner can call for the IVA to be nullified and for other action against the debtor.