How Does an IVA Work?

In an IVA arrangement, the debtors’ offer to repay the debt amount to their creditors through monthly instalments. The payment amount is agreed upon what a debtor can afford and a formal proposal is prepared with the help of an appointed insolvency practitioner.

This kind of arrangement is acceptable to most of the creditors since the repayment amount is likely to be higher as compared to what they would have received if the company would have declared itself bankrupt. A debtor’s proposal can be rejected by the creditors if the declared amount in the proposal pays less that 20 to 25% of the amount due to them.

Benefits of an IVA

1. The IVA is a more flexible solution to your financial difficulties than bankruptcy.

2. By getting into an IVA agreement, you can continue to run your business, as long as all the payments are being made on your behalf.

3. IVA is considered to be a flexible approach, as it does not require you to sell your property like it would have been in the case of declaring bankruptcy.

4. You can propose an individual voluntary agreement to your creditors even after a bankruptcy order has been made against you. The procedure becomes pretty complex though, but if the creditors agree to it then you may have a good chance of saving your business.

5. The agreement amount can be paid as monthly repayments and usually lasting five years can be pre paid if your becomes profitable again. The instalments agreed upon in the proposal must be paid regularly, or else the IVA would be considered in default.