Residents of the United Kingdom have a unique option available to them should they experience extreme financial hardship. Under the Insolvency Act of 1986 debtors could make a formal arrangement with their creditors in order to pay back their debt. The creation of this option came as a way in which to allow consumers to avoid bankruptcy. The act created in 1986 would later be amended by further legislation including the Insolvency Act 2000 and as well as the Enterprise Act of 2002. This option created by these pieces of legislation is referred to as an individual voluntary arrangement or more commonly known as an IVA.
When entering an IVA, the consumer would make a proposal to their creditors regarding debt repayment. These agreements may even include requests from the debtor to temporarily postpone repayment of the debt. The IVA process was further amended in 2000 in order to reduce costs of seeking an IVA as well as making the process quicker to go through.
Technically it is the debtor who must drop the proposed IVA. However the agreements can be quite technical so debtors need to seek the services of an insolvency practitioner. In some cases it is actually the insolvency practitioner that creates the individual voluntary arrangement document. The insolvency practitioner will look over the proposed IVA and provide the debtor assistance in tweaking the document as necessary. Once the insolvency practitioner believes the document to be legally sound they would then arrange a meeting with a debtor's creditors.
The IVA must include certain information in order for it to be seriously considered by ones creditors. The document should provide an explanation as to why the IVA is necessary at the time. Also the IVA should provide reasons for which the creditors should abide by the proposal. Additionally the document should contain information regarding the assets and liabilities of the debtor. An effort should be made in the document to explain to ones creditors why this would be a more viable option than seeking bankruptcy. Finally the individual voluntary arrangement should provide a time frame with a projected completion date.
