Individual Voluntary Arrangements and Alternatives to Bankruptcy

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Individual Voluntary Arrangements and Alternatives to Bankruptcy

The main alternatives to bankruptcy are:

  • An informal arrangement with your creditor or creditors;
  • A Debt Relief Order;
  • An Individual Voluntary Arrangement.

Informal arrangement

If you have only one creditor who is threatening to take legal action against you, they may be willing to accept instalment payments, particularly if you can offer security over a property or other valuable assets. If you have a number of creditors who are chasing payment, it may be possible to get them all to agree to a repayment arrangement, although it is unlikely to be possible to share any security available. Moreover, the problem with any informal arrangement with creditors is that there is no legal restraint on the creditors (unless there is a formal settlement agreement in place with each creditor) and any one of them could break ranks at any time and commence legal action.

Debt relief order

This process, which came into effect in 2009, has had the effect of removing those on low income and assets of low/no) from the full bankruptcy process. A debt relief order is available to debtors who:

  • Owe less than £20,000;
  • Have less than £50 per month surplus income (taking into account reasonable domestic needs);
  • Have less than £1,000 worth of assets (motor vehicles are excluded provided that the car is worth less than £1,000 or is needed for disability purposes);
  • Have not applied for a DRO in the last 6 years.

It is not available for the following debts:

  • Secured debts;
  • Court fines;
  • Family maintenance payments;
  • Student loans;
  • Debts created after the DRO has been issued.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement with your creditors to pay off all or some of your debts.

It works as follows:

  • You will need the approval of the majority of your creditors;
  • If it is approved no bankruptcy petition may be presented or proceeded with and no other legal action can be taken to enforce payment of the debts whilst the IVA is in force. If a bankruptcy order has been made against you, you can apply to have it annulled;
  • The IVA proposal may involve a repayment plan or handing over some assets for the benefit of the creditors, or a combination of the two;
  • It is under the control of an Insolvency Practitioner called the ‘supervisor’.

If you make payments in accordance with the agreement, and otherwise comply with the terms of the agreement, you will not be made bankrupt or have other legal action taken against you in respect of the debts.

How to obtain an IVA

You will need the assistance of an Insolvency Practitioner to take the following steps:

  • A proposal for the IVA must be prepared in the proper form. At this stage the Insolvency Practitioner acts as the ‘nominee’. The role of the nominee is establishing credibility for the proposal with the creditors. The nominee will normally draft the proposal along with the supporting documents including the debtors’ Statement of Affairs and, if the IVA is approved, will go on to become the “IVA supervisor”;
  • An application may need to be made to the court for an interim order to provide a moratorium (freedom from most forms of legal action against you) whilst the proposal is considered by your creditors. The interim order lasts for 14 days but it may be extended;
  • Before the IVA proposal can proceed, the nominee must submit a report to the court stating that it has a reasonable prospect of being approved and implemented;
  • A meeting of creditors must be summoned with the correct form of notice being given to all creditors. This must take place between 14 and 28 days after the nominee has submitted the report to the court. The nominee acts as chairman of the meeting and has the power to decide whether to accept or reject debts for voting purposes. At the meeting, creditors may propose modifications to the IVA.

The proposal must be approved by at least 75% of the creditors by value, voting at the meeting or by proxy. But it is also necessary that over 50% of these votes are from creditors who are not connected with the debtor.

Once the proposal has been approved:

  • The chairman of the meeting files a report with the court indicating the outcome of the meeting;
  • The chairman provides details of the IVA to the Secretary of State. These details will be entered in the register of IVAs which is open for public inspection;
  • The supervisor will file reports of receipts and payments until the IVA has been completed;
  • If problems arise in connection with the implementation of the IVA the supervisor can apply to the court for directions as to how to proceed;
  • If the terms of the IVA are not complied with, a warning may be given by the supervisor. If this does not lead to the IVA being adhered to, the arrangement may be terminated. In that event, in accordance with the terms of the IVA, the supervisor is likely to petition for the debtor’s bankruptcy;
  • The supervisor may then become the trustee in bankruptcy.

To discuss the alternatives to bankruptcy, please email litigation@grantsaw.co.uk or contact our insolvency experts on 020 8858 6971.

Meet the Individual Voluntary Arrangements and Alternatives to Bankruptcy team
Ray Crudgington
Managing Partner
Managing Partner
greenwich
02083054224
ray.crudgington@grantsaw.co.uk
Maria Lati
Maria Lati
Partner
Partner and Head of Residential Property
blackheath
02083054229
maria.lati@grantsaw.co.uk
Mike Clary
Family
Partner and Head of Family
greenwich
02083054237
mike.clary@grantsaw.co.uk
Kalpa Prajapati
Partner
Partner and Head of Private Client
blackheath
02083053536
kalpa.prajapati@grantsaw.co.uk
Mario Savvides
Commercial Property
Partner and Head of Commercial Property
greenwich
02083053531
mario.savvides@grantsaw.co.uk
Sarah-Kate Jackson
Litigation
Partner and Head of Litigation
greenwich
02083054236
sarah-kate.jackson@grantsaw.co.uk
Adina-Leigh Collins
Litigation
Solicitor
greenwich
02083053556
adina-leigh.collins@grantsaw.co.uk
Aimal Gram
Commercial Property
Solicitor
greenwich
02083053524
aimal.gram@grantsaw.co.uk
Aisha Mohammed
Aisha Mohammed
Residential Property
Professional Support Lawyer
greenwich
02083054228
aisha.mohammed@grantsaw.co.uk
An Le Tran
Commercial Property
Professional Support Solicitor
greenwich
02083054226
anle.tran@grantsaw.co.uk
Ana-Maria Badeanu
Ana-Maria Badeanu
Corporate and Commercial
Solicitor
greenwich
02083053539
ana-maria.badeanu@grantsaw.co.uk
Angela Shaw
Angela Shaw
Private Client
Solicitor
blackheath
02083054234
angela.shaw@grantsaw.co.uk
Angus Young
Litigation
Solicitor
greenwich
02083054225
angus.young@grantsaw.co.uk
Atifha Aftab
Atifha Aftab
Family
Solicitor
greenwich
02083054238
atifha.aftab@grantsaw.co.uk
Bimal Kotecha
Litigation
Solicitor
greenwich
02083053523
bimal.kotecha@grantsaw.co.uk
Charlotte Warren
Charlotte Warren
Private Client
Solicitor
blackheath
02083054231
charlotte.warren@grantsaw.co.uk
Claire Mac Mahon
Litigation
Solicitor
greenwich
02083053537
claire.macmahon@grantsaw.co.uk
Deborah Taite
Residential Property
Solicitor
blackheath
02083053542
deborah.taite@grantsaw.co.uk
Emily Pearce
Residential Property
Solicitor
greenwich
02083053526
emily.pearce@grantsaw.co.uk
Georgia Beales
Litigation
Paralegal
greenwich
02083054206
georgia.beales@grantsaw.co.uk
Jeremy Brooks
Jeremy Brooks
Private Client
Solicitor
blackheath
02083053534
jeremy.brooks@grantsaw.co.uk
Joanna Godden
Notary Public
Notary
greenwich
02083083627
joanna.godden@grantsaw.co.uk
Lauren Smith
Employment
Paralegal
greenwich
02083053543
lauren.smith@grantsaw.co.uk
Mandeep Clair
Family
Solicitor
greenwich
02083054235
mandeep.clair@grantsaw.co.uk
Michael Pope
Corporate and Commercial
Solicitor
greenwich
02083053540
michael.pope@grantsaw.co.uk
Michelle Pinnington
Michelle Pinnington
Residential Property
Solicitor
blackheath
02083054216
michelle.pinnington@grantsaw.co.uk
Noella Gooden
Noella Gooden
Employment
Solicitor (Australian qualified)
greenwich
02083053543
noella.gooden@grantsaw.co.uk
Raj Waghela
Raj Waghela
Residential Property
Solicitor
greenwich
02083053529
raj.waghela@grantsaw.co.uk
Randeep Thethy
Randeep Thethy
Residential Property
Solicitor
greenwich
02083054209
randeep.thethy@grantsaw.co.uk
Sarah Hogan
Sarah Hogan
Residential Property
Solicitor
blackheath
02083054214
sarah.hogan@grantsaw.co.uk
Simona Morina
Simona Morina
Litigation
Solicitor
greenwich
02083053521
simona.morina@grantsaw.co.uk
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Simone Gavioli
Litigation
Solicitor
greenwich
02083053548
simone.gavioli@grantsaw.co.uk
Susan Collins
Commercial Property
Solicitor
greenwich
02083054200
susan.collins@grantsaw.co.uk
Tatiana Zenina
Tatiana Zenina
Private Client
Solicitor
blackheath
02083054239
tatiana.zenina@grantsaw.co.uk
Trisha Djemal
Trisha Djemal
Residential Property
Consultant Solicitor
blackheath
02083053546
trisha.djemal@grantsaw.co.uk
Tyrone Grant
Residential Property
Head of Leasehold Enfranchisement
blackheath
02083053522
tyrone.grant@grantsaw.co.uk
Denise
Accounts Staff
greenwich
02088586971
enquiries@grantsaw.co.uk
Helen Arney
Helen Arney
Support Staff
HR Manager
greenwich
02083054233
helen.arney@grantsaw.co.uk
Jamie
Support Staff
Head of IT
greenwich
02088586971
enquiries@grantsaw.co.uk
Jayne Lye
Support Staff
Office Manager
greenwich
02083054204
jayne.lye@grantsaw.co.uk
Kasia
Accounts Staff
greenwich
02088586971
enquiries@grantsaw.co.uk
Michael Tobin
Michael Tobin
Support Staff
Marketing and Business Development Manager
greenwich
02083053550
michael.tobin@grantsaw.co.uk
Laura Danquah
Solicitor and Compliance Manager
greenwich
02083054222
laura.danquah@grantsaw.co.uk
Sue Holness
Support Staff
Customer Services
greenwich
02083054221
sue.holness@grantsaw.co.uk