The Individual Voluntary Arrangement (IVA) Approval Process
As an outline it can take between four and six weeks to set up an IVA, dependent upon how quickly the individual can provide information such as copies of statements and payslips. This is known technically as the 'Nominee' process, as it requires a named Insolvency Practitioner to put forward the proposal. Each insolvency practice will have a slightly different process and will use slightly different templates but in general they all follow a similar pattern.
Fact Find:
An interview either face-to-face or over the phone to establish a clear understanding of the situation, and confirm that an IVA is the most suitable procedure. Information collected includes: household information, background to the debt, creditors, assets, monthly income, monthly expenditure. An IVA application can be made either as an individual (single) or as a household couple (joint). The latter does not require the couple to be married.
Collect Supporting Evidence:
The insolvency practice is required to collect evidence that shows that what they are being told is true.
This due diligence makes sure that the proposed IVA is fair to creditors. i.e. That the amount paid each month is the full amount that the individual can afford. But it also makes sure that the individual can afford the payments. i.e. That they are able to live without discomfort, and that they will be able to keep up the payments for five years.
Evidence includes:
- Evidence of debts (e.g. statements from each creditor)
- Proof of income (e.g. payslips)
- Proof of expenditure (e.g. rent, monthly bills, etc.)
- Value of assets (e.g. property valuation, make/model/year of car, etc.)
- Formal identification (e.g. passport, drivers licence)
- Draft IVA Proposal
Based on all the information gathered a proposal document is drafted by the insolvency practice. This document may be several pages long and is often in several parts (schedules).
There are a few basic types of IVA although most of them are very similar:
- Single (one applicant) or Joint (two applicants)
- Monthly payments only (normally 36 to 60 months)
- Lump sum only (normally from re-mortgage or family)
- Monthly payments plus lump sum
The debtor needs to read the IVA proposal and sign it once they are totally comfortable with the contents.
Send to Creditors:
Once the IVA proposal has been signed by both the debtor and also by the Insolvency Practitioner who is acting as the Nominee, copies are then sent to each of the creditors.
Each copy is accompanied by any required background information and a covering letter from the Insolvency Practitioner.
The creditors are asked to read the proposal and vote on whether to approve it or not. They are also asked to provide proof of the claim they have for the debt.
Copies are also sent to the local County Court and to the insolvency service.
Creditors Reviewing and Voting:
The creditors are given a minimum of two to three weeks to review and respond to the proposal.
Often it is a specific department of the creditor that deals with the IVA, e.g. the Collections and Recoveries department.
Also the major banks tend to use one of the major accounting firms to help them process all of their IVAs. 70% or more of UK banks are represented by professional firms.
Sometimes it takes a few days for the proposal to be forwarded to the correct department or external firm.
Meeting of Creditors:
A specific date and time is set to bring together the votes from the various creditors. The Insolvency Practitioner acts as the Chairman of this meeting.
This is almost always a virtual meeting whereby the creditors send through their votes in advance by fax or by post.
Creditors can choose to 'Approve', 'Reject' or 'Approve with modifications'. Some creditors do not vote at all.
If over 75% (by value of debts) of voting creditors approve the IVA, then it is binding on all creditors including those who rejected or did not vote.
If it is undecided the Insolvency Practitioner can put back (or adjourn) the meeting while he communicates between the creditors and the debtor. He can continue to do this for up to two weeks.
Post Meeting Set Up:
Once the IVA has been approved, all of the relevant parties must be informed.
The Insolvency Practitioner sends out a Chairman's Report that documents the voting and the outcome of the meeting.
The Court is also informed and a notice is sent to the Insolvency Service so that they can record the IVA on the Insolvency Register.
At this point a new bank account is set up for the IVA into which the payments are made monthly, and the Insolvency Practitioner begins the Supervision period.
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