The purpose of an individual voluntary arrangement (IVA) is to avoid a bankruptcy order, even though the debtor is in financial difficulties.
Appointment of nominee The debtor requires professional assistance, so an insolvency practitioner (the debtor’s nominee) must be found, who will draw up proposals and supervise their implementation if they receive the approval of creditors.
Implementing the voluntary arrangement If the creditors approve the proposed voluntary arrangement, the nominee, now called a ‘supervisor’, will implement the proposals. The supervisor or any creditor may still petition for the debtor’s bankruptcy, if the debtor fails to comply with the arrangement or if it subsequently transpires that the creditors gave their approval on the basis of false or misleading information.
Advantages of voluntary arrangements for debtors are that the stigma of bankruptcy, bad publicity and the possibility of a public examination in court are avoided. They also avoid the disabilities and disqualifications that follow from being declared bankrupt.
The advantages of voluntary arrangements for creditors are that they will recover a higher percentage of the debt due to them, and they should be paid sooner than in a full bankruptcy. The costs of a voluntary arrangement are lower and the process is less protracted than bankruptcy.Last Updated
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