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Operational of Individual Voluntary Arrangements

Individual Voluntary arrangements are a system that is a substitute to bankruptcy. It was started in UK and was included in the Insolvency Act, 1986. It aids people having financial problems therefore escaping bankruptcy. Creditors in an IVA are paid by the debtors using this system. The debtor should pay back at the agreed time between him and the creditors. Since its initiation, it has never been modified. Companies that are unable to pay back their debts are guided by laws that explain the repercussions if they don't repay. Example, there is a rule stating that a petition can be provided by the court to end a company if it can't repay. In Scotland, IVA process is practiced but its referred to as Trust Deeds. The deeds has the same process as the IVAs with similar roles.

 IVA has specific assets which include home and car owners. This process of IVA is meant to last after 5 years.

People that Qualifies to apply an IVA

IVA can be applied by anyone having the following feature:

• Insolvency. The debt of a person who wishes to apply should be a lot bigger compared to the value of all that belongings that they possess.

• The level of debt. The person should be having a big amount debt needed to be repaid. He must have variety of credit lines, at least 3, which the creditors can divide among themselves.

• The status of employment. A person must at least be employed before he/she qualifies. Self-employment also counts although the procedure for such people is complicated.

After the person has qualified, a registered Insolvency Practitioner, IP, is assigned to assist an individual in starting an IVA. Its because of the formal status the system follows thereby legal issues are stopped from arising.

The IP takes the role of an IVA supervisor until the agreement is terminated. He acts as a link between the creditors and debtors. He deals with everything relating to paper work in the process of IVA. When the whole process is over the IP bears the responsibility of informing any relevant party and the court about its ending.

The IVA process requires that an applier has the proper documents before the process can be initiated for them. Example, IVA proposal documents and documents of all the properties and assets a person possesses. An IVA proposal takes 14 days before its considered. It is ensured that both the creditors and debtors are fairly treated and each is satisfied with the agreements made. This responsibility is taken by an Office of fair trading.


Process of the Individual Voluntary Arrangements

Essential living expenses are conversed by the IP and debtor

Creditors are then presented with a repayment strategy and to be approved by at least 75% of creditors

The repayments should be made monthly or else the court will declare the person bankrupt


There are meetings conducted by the creditors to approve the process. The debtor is required to attend.

Debts that are included in an IVA

These are:

• Loans from family and friends

• Useful Bills from previous properties

• Bank loans. These are mainly the unsecured debts.

Advantages of IVA

Protection of homes. There is no longer risks of people losing their homes since IVA has fair terms. This creates some peace of mind for the debtors and concentrate on other living expenses.

Affordability. IVA ensures that the repayment agreement is made as per the debtors' ability to repay. They are not forced to repay large amounts if they can't afford to do so. What they repay is what they can afford.

Stability. Being a legal agreement, changing the terms of repayment is a whole complicated legal process making the creditors stick to their first agreement with the debtor. This favors the debtor.


Reviews of finances. There are yearly review done on the debtor to see if there are any increment of their earnings. If so, the amount to be repaid is increased. This is an essential condition of an IVA.

Contract that is legally binding. A debtor should be familiar with some terms of IVA. Example, IVA can be annulled if the debtor missed any monthly payment.