Getting off the Ground Dealing with your personal insolvency should be like any project for personal improvement. It should start with a plan and end with implementation with the right decisions taken at each stage. Like any plan you need to know where you are before deciding where you want to go and how you will achieve that goal. The first thing to do is to determine if you are in fact insolvent. Can you pay your debts? Do your assets exceed your liabilities? Who can determine this? To determine if I am insolvent I intend to obtain advice from several providers of insolvency services and I may also talk to CAB and perhaps the CCCS. I understand that this type of initial advice is free and I intend to confirm this before I pay for any advice. I also expect to be fully briefed on what choices are available to me if I am in fact insolvent. Perhaps, if I am not in negative equity, I can sell my property to clear my unsecured debts? I hear that a lot of people are opting for bankruptcy and maybe that’s the right route for me. What appeals to me about an Individual Voluntary Arrangement is that you re-pay as much of your debts as you can afford over a reasonable period of time and that’s what I want to do.
Putting Together an IVA Proposal Since you have to be insolvent to enter an IVA, then that is the first thing to verify and any reputable insolvency firm will do this for you quickly and free of charge. You probably have enough information in your head about your finances for them to do this but if not, it does not require a lot of documentation to complete the exercise. A good Insolvency Practitioner (IP) will explain all the options open to you if you are insolvent. If you still want to proceed with an IVA – and you should only do this, if it is indeed your preferred option – you will be required to provide various documents to your IP or your case manager, if one is assigned to look after your case. I understand that I will have to furnish recent pay-slips, bank statements, credit card statements, loan agreements & statements, HP agreement & statements, mortgage statements, correspondence from creditors and debt collectors. I will also provide my monthly household budget showing my outgoings and earnings as well as any other documents required relating to my mortgage and my car HP. I will make myself available to meet with my IP or case manager in person or by way of telephone meetings. After this process, I would hope that my IP can construct an IVA proposal for me for my creditors to consider.
Decision Time – The Meeting of Creditors (MOC) Your ‘nominee’ i.e. the IP whom you have chosen to assist calls the MOC at a date and time – normal working hours on a working day – which suit your creditors and you. Neither you nor your creditors need to attend the meeting in person, although both have the right to do so. You will need to be contactable during the scheduled time of the meeting. Creditors generally communicate in writing (letter, fax or e-mail) with the chairman of the meeting – who is usually your IP or an experienced staff member. By proxy-voting and providing proofs of your debts, your creditors decide whether to accept or reject your IVA proposal or to accept it subject to your agreeing that some of the terms of the proposal be amended – usually called modifications. The chairman will relay these matters to you and communicate with your creditors on your behalf on all matters and may adjourn the meeting for up to two weeks while you consider if you are prepared to accept any modifications. I understand that I can decide not to proceed and to withdraw my IVA proposal at any point up to and including the meeting of my creditors. If I should do this, I am no worse off than before and I understand that I should not incur any costs for work done up until now by the nominee and other staff. Assuming that over 75% of voting creditors accept my proposal and that I accept the modifications, what happens next?
Birth of the IVA At least 75% by value of those of your creditors who chose to vote must accept your proposal and you must of course agree to accept the creditor modifications (if any) for your IVA to be approved. Once these two conditions are met the IVA is officially approved and becomes binding on you and on all of your unsecured creditors, including those creditors who chose not to vote at all. The chairman of the MOC now prepares the ‘Chairman’s Report’ and circulates it to all creditors, to the court and of course to you. In it is summarized the outcome of the MOC and what you must do to successfully complete your IVA. It also identifies the name of the IP who is going to supervise your IVA. This is often the same IP who acted for you as nominee up until the MOC. I understand that at this stage all of my unsecured debts will be dealt with under my IVA and my creditors must stop chasing me for repayment. I will immediately commence making monthly payments to my IVA and also contribute any other monies required under the terms of my approved IVA. My supervisor has the responsibility of distributing these funds to my creditors.
Supervision of an IVA It can seem like a new beginning when an IVA is approved, particularly for the debtor and his or her family. All the bad things that were happening cease to occur – particularly the grief that the debtor has had to endure from creditors and debt collectors. Granted, it may take a few weeks for certain creditors and debt collectors to stop their actions, but this is due to their tardy internal communications systems more than anything else. At least the debtor can refer them to the supervisor of the IVA when they come calling or phoning or writing. Good financial discipline and a supportive supervisor will ensure that the IVA has an outstanding chance of surviving for its planned duration – usually five years – and be concluded successfully. It’s hard to believe that a plan can be so simple and that the prospects for success are so high. For people like me who want to repay as much of their debt as possible an IVA is an excellent alternative to bankruptcy and the average duration makes it so much more attractive than a Debt Management Plan which I understand can last ten years or more. To be debt-free, worry-free and creditor-free in five years or less even is a goal worth pursuing.