Individual Voluntary Arrangements

An IVA is essentially a contract, supervised by a licensed insolvency practitioner, between an individual and his/her creditors to repay a proportion (or the entirety) of their debts over a period of time. It is often an attractive alternative to bankruptcy, if an individual has assets which may be at risk and may be able to offer creditors a better outcome via an IVA process. The individual may raise funds by disposing of some assets, arranging for a third party to provide funds (often in lieu of assets) and/or make monthly voluntary contributions from future income for the benefit of the creditors.

The advantages to the insolvent individual of an IVA can include:

• The avoidance of the perceived stigma of bankruptcy.
• A flexible approach to asset realisation and payment schedules.
• The ability of a sole trader to continue a business.
• The debtor may avoid debarment from professional associations or from acting as a director.
• The ability for a debtor to more easily raise or earn funds to repay their creditors.
• A bankrupt debtor could seek the annulment of the bankruptcy order.

The advantage to the creditors is that they must receive a higher dividend than they would do in a bankruptcy and avoid the need to issue bankruptcy proceedings.