Clough & Willis Solicitors, Commercial and private legal services UK

Individual Voluntary Arrangements

I have set out below what I hope is useful and helpful detailed information if you are considering entering into an Individual Voluntary Arrangment (IVA). 

A Voluntary Arrangement is an arrangement which an individual enters into with its creditors.  It has been widely used as an alternative to a debtor entering into an informal arrangement with creditors and a debtor's own bankruptcy Petition.  

An individual Voluntary Arrangement allows a debtor to enter into an arrangement which is binding on all of the creditors, provided sufficient vote for the arrangement and it does not contain the same restrictions as would follow from the making of a bankruptcy Order.  Consequently this has become a very popular way of dealing with debts.  

In order for someone to enter into a Voluntary Arrangement, they will need the assistance of a licensed insolvency practitioner who will help them to draw up their proposal and will become the Nominee and arrange the necessary creditors' meeting.  If the creditors approve the Voluntary Arrangement, then the Nominee will usually become the Supervisor of the Arrangement and maintain control of the Arrangement during its lifetime.  

Voluntary Arrangements can take many forms.  Most commonly they involve the debtor offering to make monthly payments to the Supervisor, usually over a period of 5 years.  This can appear to be a long time, particularly as a bankruptcy Order would only last for 1 year and if a bankrupt were required to make contributions from their income, those contributions only run for a period of 3 years.  However, for many debtors the advantages of avoiding bankruptcy mean that they are willing to enter into a longer term commitment to make these voluntary payments.

In order for the Voluntary Arrangement to succeed three quarters in value of the creditors who vote, either in person or by proxy, must approve the Arrangement.  Some creditors will want extensive modifications of the Arrangement before it can go ahead and some creditors simply will not vote at all.  Sometimes the debt of one creditor may be sufficiently large for them to defeat the Voluntary Arrangement proposal but this is something that the Nominee would normally advise a debtor about. 

Whilst entering into a Voluntary Arrangement can seem a very attractive option, allowing someone to carry on as a director of a  limited company, or to carry on running a normal bank account, both of which would be impossible if a bankruptcy Order were made, a Voluntary Arrangement is not something to be undertaken lightly. 

It is quite common for the proposals put forward to creditors to contain a provision which says that in default of the debtor making the monthly contributions from income that the Nominee can fail the Arrangement and can present a bankruptcy Petition against the debtor.  Indeed, if the proposals do not contain such a provision, it is likely to be one of the modifications insisted upon by the creditors. 

This means that the debtor may have gone to some considerable trouble and expense to avoid being made bankrupt only to end up as a bankrupt because of failure to meet what may be overly optimistic promises about the level of monthly contribution that they can pay.  Debtors who get into difficulty in this way,  because of illness or losing their job, should always liaise with the Supervisor to see if the creditors will agree to vary the terms of the Voluntary Arrangement.

If you are a creditor who has been served with a proposal for an IVA or a debtor who wishes to enter into an IVA with your creditors I have written the following article explaining  Individual Voluntary Arrangements in more detail -

What is an IVA?

The above is a general guide to this topic.  Your situation is individual to you.  You require specialist advice tailored to your needs.  There is no substitute for this. 

Contact me, Fiona Gaskell  or Grahame Henry now to see how we can help you and to arrange an initial meeting to discuss your individual needs.  Telephone on freephone 0800 083 0815 or by email fiona.gaskell@clough-willis.co.uk; grahame.henry@clough-willis.co.uk,



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