An IVA is effectively a contract between an individual and his/her creditors that ring-fences their historic debt to allow continuity of trade or employment and for contributions (either by way of a lump sum or agreed monthly payments) to be made in settlement of the debt.
The individual retains control of their assets (eg the matrimonial home) whilst at the same time protecting them. This is important, for example, in cases where business assets are required for ongoing trading.
In order for an IVA to be approved, it requires more than 75%, in value, of creditors who vote on the IVA proposal (at a meeting of creditors convened for this purpose) to be in agreement. This means that if you have one or several large creditor(s), it is they who can effectively control the outcome of the process.
On the other hand, as long as the larger creditors are in agreement, then the IVA will be binding on all creditors, including any smaller creditors who had perhaps voted against it.
It is not necessarily the case that an individual will have to offer to repay 100% of the debts they owe. The amount creditors will receive depends on:
– The value of the individual’s assets
– The amount of disposable income
If creditors aren’t completely happy with what has been proposed then they may accept the IVA but put forward some modifications which the individual would have to agree to.
IVAs can be extremely flexible, for example if there is a change in circumstances, eg redundancy or a long-term illness. It is often possible to amend the IVA terms, provided the agreement of the appropriate majority of creditors can be obtained.
