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Personal Debt

INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)

Voluntary arrangements are agreements between debtors and their creditors in full and final settlement of all outstanding debts.

Voluntary arrangements may be proposed by an insolvent debtor in order to avoid liquidation or bankruptcy and in turn preserve a viable business. Such arrangements require a Licensed Insolvency Practitioner to assist in the preparation of a proposal, and supervise the implementation of the arrangement. The scheme requires in excess of 75% in value of those creditors voting, to support the arrangement for it to be accepted and become legally binding upon all the creditors. Such arrangements have tax advantages over informal deals with creditors.

The proposal can be extremely flexible and can be used even in circumstances where liquidation or bankruptcy proceedings have already commenced.

The court may grant you protection under an interim order, which has the effect of preventing creditors, under most circumstances, taking or continuing action to recover their debts during the period between commencement of the procedure and the implementation of the arrangement.

Voluntary arrangements do not affect the rights of secured creditors such as mortgagors and debenture holders. Professional negotiations with such creditors can usually ensure that voluntary arrangements are acceptable to such creditors.

BANKRUPTCY

Bankruptcy is the equivalent procedure to compulsory liquidation for an insolvent individual. The petition can however be presented either by a creditor or the individual himself.

Bankruptcy has the effect of placing the debtor’s assets under the control of the Trustee in Bankruptcy. It has the effect of stopping any action by a creditor against the debtor.

The formalities of making a bankruptcy order and the appointment of the Trustee in Bankruptcy are very similar to those for the appointment of a Liquidator in a compulsory liquidation. The duties of the Trustee and the Official Receiver are similar to those of the Liquidator and the Official Receiver in compulsory liquidation.

The final phased introduction of the new legislation will radically alter the situation of a person who is adjudged bankrupt.

Bankruptcies commencing after 1st April 2004 will have lasted for 1 year. Those starting before 1st April 2004 will, unless otherwise directed by Court, have been discharged on 31st March 2005.

The bankrupt’s interest in their primary residence must be dealt with by the Trustee within three years of the bankruptcy commencing. Part of the value of the matrimonial home, which has yet to be decided, may be retained by the bankrupt.

Where Can I Find Out More?

This is a brief synopsis of the insolvency procedures available, it is not intended to be a comprehensive guide to what is in effect an extremely complicated and specialised area of law.

Similar procedures apply to Limited Liability Partnerships

LA Business Recovery is able to advise you or your client at very short notice and in the strictest confidence. Please contact David Hughes or Virgil Levy on 01895 819 460 or click here to email us