Individual Voluntary Arrangement

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In the United Kingdom, Individual Voluntary Arrangements (IVAs) are a formal alternative for individuals wishing to avoid bankruptcy.

The IVA was established by the Insolvency Act 1986 and constitutes a formal repayment proposal presented to a debtor's unsecured creditors via an Insolvency Practitioner and the Court.

An IVA is a contractual arrangement with creditors and can be as flexible as an individual's own circumstances; they can therefore be based on capital, income, third party payments or a combination of these.

Creditors (normally) take a commercial decision at a creditors' meeting called to consider the IVA proposal and vote on a poundage basis. To be approved, a majority of 75 per-cent of the vote is required where connected parties (such as family) vote and then, of those voting in favour, 50 per-cent must be unconnected.

In the UK, an increasing number of consumer debtors with overwhelming levels of debt are turning to specialist debt advice organisations that offer protection from bankruptcy via the use of an Individual Voluntary Arrangement.

It is normally advantageous to set up an Individual Voluntary Arrangement before becoming a bankrupt but you can propose one afterwards; if an Arrangement is approved post-bankruptcy then the debtor can apply to the Court for an annulment of the bankruptcy order - such IVAs can only be proposed whilst the bankrupt is undischarged.

If an IVA is proposed after a bankruptcy order has been made, it is now also possible to nominate the Official Receiver to be the supervisor of the arrangement. The Arrangements offered by the Official Receiver are very restricted and have not proved very popular. This type of arrangement is called a Fast Track Voluntary Arrangement and is only suitable in certain cases.

In Scotland there is a similar procedure to the Individual Voluntary Arrangement called a Protected Trust Deed (PTD). The Trust Deed, although similar to the Individual Voluntary Arrangement in many ways, lasts only for 3 years as oppose to the normal 5 year period that constitutes the vast majority of IVA's. Trust Deeds are an alternative to bankruptcy in Scotland which is referred to as Sequestration.