9f Individual Voluntary Arrangements

Question 1

What happens if you are a sole trader or partnership and if they were a company would go into administration or liquidation?

Answer 1

They would either enter into a IVA or declare bankruptcy.

Question 2

What is an IVA?

Answer 2

Individual will enter into an agreement with their creditors to pay a set amount usually over a 5 year period. Once entered into, they cannot declare bankruptcy.

Question 3

What is bankruptcy?

Answer 3

Declaration that the individual can no longer pay off their debts. Responsibilities of the assets and debts will be taken over by a trustee, the individual no longer needs to deal with their creditors.

Question 4

What is the procedure to enter into an IVA?

Answer 4

• Debtor appoints a nominee (licensed insolvency practitioner).
• Debtor comes up with repayment schedule which nominee will review and submit to court.
• Can apply for interim order (moratorium).
• Creditor approval needed normally by deemed consent method.
• Supervisor must be appointed (this is normally the nominee) who will supervise the scheme and distribution of assets.
• Debtor is now discharged off all debt once all repayments made providing all terms are complied with.

Question 5

What happens if a debtor fails to comply with the terms of their IVA?

Answer 5

Creditors can petition the court to declare them bankrupt.

Question 6

What are the advantages of an IVA?

Answer 6

• Individual can continue business.
• Can draw up a proposal to meet their own situation.
• Less restrictions when in an IVA.
• Details not published in the press.
• Costs are less than bankruptcy.

Question 7

What are the disadvantages of an IVA?

Answer 7

• Period of 5 years is longer than bankruptcy (3 years).
• No opportunity to investigate debtors actions or whether there are any undisclosed assets.