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IVA - the costs involved?

IVA Fees

The costs of setting up and running an IVA are divided as follows:

1. Nominees' fee
2. Supervisors' fees

Interim order

If you intend to proceed with putting a proposal to your creditors, an application will be made to the court to request an interim order. This application can be made by you, a trustee of your estate or the Official Receiver.

The purpose of the interim order is to protect your property while the creditors consider your proposal. The court may even stay any legal proceedings that had been issued against you, and if you are an undischarged bankrupt, the interim order may then contain certain provisions which will relate to the conduct of the bankruptcy.

However, the court will only grant the interim order if it is completely satisfied that you fully intend to issue a proposal to all your creditors and that on the day the application was made that you was an undischarged bankrupt or was in a position where you could in fact petition for your own bankruptcy.

The court will not grant the order if you had previously made a similar application within last 12 months

Once the court grants the interim order, you will be protected from any bankruptcy petitions and unless the court permits otherwise, no other legal action can be commenced or continued against you.

The interim order lasts for a period of 14 days but this can be extended if you or the nominee applies to the court for an extension.

The proposal

You will work with the nominee (the insolvency practitioner) to prepare a proposal detailing why such an arrangement is desirable and why the creditors would be expected to agree to it. The proposal will also contain details of your assets that will be included (or even excluded) and any assets that will be provided by others.

The proposal will also include information on the nature and amount of your liabilities, the extent to which there may be claims from your secured, preferential or associated creditors and the method in which claims will be dealt with. The proposal must also include whether in the circumstances of bankruptcy, there could be claims relating to transactions at an undervalue, preferences or extortionate credit transactions.

In addition, a timetable will need to be included which will set out the proposed duration of the IVA, when creditors may be able to expect a distribution and how much they can expect to receive in accordance with the IVA.

An approximation of the remuneration and expenses of the nominee and the supervisor must also be revealed together with particulars of the supervisor's responsibility and qualifications.

In addition to the information required to be disclosed under the insolvency rules the proposal should include an explanation of the background to your situation and any plans you may have for the future.

The nominee will be expected to submit a copy of the report to the court not less than two days before the expiry of the interim order. The report is then placed on court file and can be inspected at any time by any of your creditors. The nominee must then state whether, he believes, a meeting of the creditors should be called in order to consider the proposal and, if so, the date, time and location the meeting should be held. If the court is then satisfied that a meeting should be held, it will allow an extension of the interim order. Creditors' meeting

The creditors' meeting to review and then approve the proposal must be held at a location that is convenient for the creditors on a business day between the hours of 10 am and 4 pm. The meeting must be chaired by the nominee or his substitute.

Votes of creditors are calculated according to the amount of a creditor's debt. However, votes of secured creditors will be calculated on the unsecured part of their debts only. If the creditors decide there ought to be alterations or modifications to the proposal, they will need to vote for the same and there is a requirement that for it to be effective there needs to be an excess of three quarters in value of the creditors present (in person or by proxy) and voting.

If more time is needed to for the proposal to be accepted the meeting may be adjourned as many times as required provided that each adjourned meeting is held within 14 days of the original meeting.

Once the creditors at the meeting approve the arrangement every person who had notice of and was entitled to vote at the meeting, whether or not he actually did so, is bound by the agreement. The meeting cannot, however, affect the rights of secured or preferential creditors without their consent. The chairman must prepare a report on the meeting and file a copy with the court. He must also inform all those who were sent notice of the meeting whether or not the proposal was accepted, and if so whether it was modified.

On approval of the proposal, the chairman will need to lodge the information regarding the arrangement with the Secretary of State for insertion into a register which would be available for public inspection.

Supervisor

The supervisor has the responsibility of managing your assets that are included in the IVA and will have the role of keeping the accounts and records takes charge of the assets included in the voluntary arrangement and is required to keep accounts and records of all his dealings and transactions during the term of the IVA.

The supervisor is required to put together a summary of all the payments and receipts which he will need to send to the court and the creditors and you within a two month period of the parties being bound with the arrangement. The supervisor will also need to comment on any progression under the CVA.

In addition to this summary the supervisor must include a report commenting on the progress made.

Should creditors accept the debtor's proposal?

Legislation provides insolvent individuals with the necessary framework to enable them to come to an arrangement with their creditors. Some debtors do however use the IVA simply to avoid bankruptcy. All creditors will need to consider the proposal carefully and weigh the pros and cons of the IVA against each other. They will be required to attend the meeting and put any questions or concerns they may have about the proposal to the nominee or the debtor.

The creditors are likely to favour the proposal if it appears to be genuine and the creditors can see that it would be the best way to receive a return of what they are owed.

If on the other hand however, it appears that the proposal that has been put forward is not genuine or has little chance of any success, the creditors may oppose the arrangement and petition for bankruptcy.

Questions for the nominee or supervisor

In reviewing the proposal, the creditors will need to take into consideration the professional position of the nominee as well as the duties and responsibilities outlined in the proposal of the supervisor.

The creditors will be looking to ensure that the supervisor will have the appropriate discretion and authority to be able to take action if the debtor does not comply with the IVA.

Does an IVA protect debtors from bankruptcy petitions in the future?

It is important to note that if the debtor does not comply with the terms of the IVA, the creditors will be able to petition for a bankruptcy order

Any new creditors will not become part of the IVA and will therefore be able to be able to apply to the court for a bankruptcy petition.

As you will be aware, your creditors will be entitled to receive the maximum you can afford.

On reaching the end of the IVA, it will be considered that you will have made a 'full and final settlement of your debts'. If you have any negative credit ratings, they will then be removed.

• The total amount of your debt that you would have repaid to your creditors would have been significantly reduced and the balance would have been written off.
• Your repayments will be made over a fixed period (usually five years).
• You will be aware beforehand of how much you will be required to pay on a monthly basis.
• Any interest charges will have been cancelled
• Legal action is halted and any demands, letters or telephone calls from any of your creditors will cease for the duration of the IVA.

You will pay a monthly amount despite the number of creditors you may have.

For free advice on IVA's or any other aspects of insolvency, contact our offices as we will be able to offer you with bespoke solutions as we have been highly successful in securing creditors approvals.