See also individual voluntary arrangement (IVA)
Introduced under the Insolvency Act 1986
with the intention of allowing an individual to avoid bankruptcy and make
maximum possible restitution to creditors.
An IVA is seen as preferable to bankruptcy as the debtor can retain his tools of
trade and, in the case of a professional person, continue to practice, or hold
IVAs can be set up for either a person or a company. An Insolvency Practitioner
petitions the High Court for protection for a borrower debtor under an IVA. A
proposal is put to the creditors of whom 75% must accept. If this is achieved,
the arrangement becomes binding upon debtor and all creditors named in the
agreement. If the debtor fails to meet payments under an IVA the Insolvency
Practitioner is likely to petition for the individual to be made bankrupt.
Whilst bankruptcy normally lasts for only three years some creditors insist that
IVAs last a longer period.