Case Study – putting in place an IVA
An Individual Voluntary Arrangement (IVA) provides individuals with protection from legal action while trying to settle debts. It is a good option for those wanting to repay debts, or an agreed percentage thereof, over a set period of time and avoid bankruptcy. This can be particularly useful for sole traders, directors of limited companies or those with assets at risk.
We recently implemented an IVA for one of our clients who was a director of a limited company that had gone into liquidation. This was causing him two issues:
- an overdrawn loan account that the liquidator was chasing for repayment;
- he had personally guaranteed some of the company’s liabilities.
He also had personal credit card liability.
We put together an IVA proposal that suggested he pay £500 per month over 60 months (a typical length of time for an IVA and a realistic proposition for our client). After this time he could then look to release 85% of his share of the equity in his property to maximise the return to creditors, albeit this fell well short of payment in full. Under the terms of the Proposal, if he was unable to obtain a re-mortgage then he could extend his IVA for another 12 months, continuing his contributions. The debtor would retain the matrimonial home.
After 14 months of payments our client’s wife received an inheritance and was willing to offer a lump sum to pay off the IVA early, ensuring that creditors were not disadvantaged.
The final payment to creditors was 11p in £1, which is quite low but the alternative in bankruptcy was 7p in £1and ultimately the requisite majority of creditors agreed to the Proposal and dividend offered. A successful outcome for all involved.
If you are interested in finding out more about how an IVA could help you or your clients please get in touch.