Individual Voluntary Arrangement
Just when the business challenges are starting to make sense, personal difficulties can overtake you. Individuals may face financial difficulties arising from business activities. We are happy to help with that too as part of our focus on business rescue and insolvency. Business related personal insolvency can arise, for instance, where creditors of a limited liability company have been personally guaranteed.
One option is an individual voluntary arrangement (“IVA”) – this is a formal arrangement with creditors that legally binds on all creditors if 75% of those creditors voting upon your proposals agree. The arrangements can offer a flexible approach and are ideal when all stakeholders want to work together to find a solution. IVA proposals need to be made via a Licensed Insolvency Practitioner and are often based on monthly contributions, however they can involve one-off settlements for a better realisation of assets.
Once approved an IVA may last for a period of up to five years (shorter if not a monthly contributions based IVA). The Licensed Insolvency Practitioner (now called a Supervisor of the IVA) will monitor the debtor's compliance with the terms of the IVA with annual reports being sent to creditors often with an annual dividend payment. Failure to comply with the terms can lead to IVA failure and subsequent bankruptcy.
Individual voluntary arrangements are not suitable for everyone and it is important that you take independent professional advice based on your own personal circumstances. Be very wary of so called IVA factories/specialists that can end up selling you the product they have on the shelf regardless of your individual needs.
How can McTear Williams & Wood help?
We understand the impact that such pressures can bring. The extent of the impact may depend on how the debts have built up and we can help with an assessment of your individual circumstances. Financial problems often have a big effect on personal relationships especially when the size of the problem comes as a surprise to one or both partners. Much of the information provided in the 'services for business' sections is relevant for the individual in business too.
Other options for individual debt problems include:
- Informal arrangements – these can be useful, particularly when you are dealing with only a handful of creditors. We can help you negotiate with creditors who will readily understand what their alternatives are if they see that we are involved.
- Debt management plans – managed by an outside agency these are informal agreements with your creditors to accept a lower monthly payment based on what you can afford and mainly deal with consumer debt. They are not legally binding and normally do not allow any of the debt to be written off. Used inappropriately they simply put off the inevitable and end in an IVA or bankruptcy.
- Bankruptcy– this occurs when a trustee is appointed by the Court to sell your assets and distribute them to your creditors. For most people bankruptcy lasts for one year but the consequences of bankruptcy can stay on your credit history for longer. It is important that you understand the implications of becoming bankrupt and if there are any alternatives. But for many people it is the best option.
If you need advice regarding individual voluntary arrangements please do not hesitate to contact Scott Earrey, our personal insolvency specialist, on freephone 0800 331 7417 who can provide you with some free and confidential initial advice.
