IVA is a legal process that entitles the borrowers to have the privilege of paying what he can afford comfortably. It is a repayment agreement signed between the debtors and all his creditors.
Borrowers usually go for an IVA when they are unable to pay off their debts. IVA also enables them to avoid bankruptcy, whilst keeping their credit ratings at a reasonable position. However, a borrower can follow this step by step procedure to obtain an IVA.
Step 1: Select a Registered Insolvency Practitioner:
Select a registered Insolvency Practitioner to become a nominee for the IVA. The insolvency practitioner drafts the IVA proposal that shows the amount of funds or assets that can be made available to pay off the debt. The insolvency practitioner provides reason why the draft has been made in the interest of both the parties.
Step 2: The draft is produced in the court
The draft is produced in the court for approval. The court may reject or approve the proposal and grant the interim order. The creditors will be unable to take any legal action if the court approves the IVA proposal and grants the interim order. Hence the creditors cannot petition for a bankruptcy within the stipulated period.
Step 3: Creditors meeting is called
The insolvency practitioner calls for a creditors meeting. There the debtor must get a minimum of 75% votes in favour of the proposal. The vote decides if the proposal is viable or not. Once it is decided the creditors get bound by the terms of the proposal. Henceforth, the insolvency practitioner becomes the supervisor of the IVA schedule.
Step 4: the Insolvency practitioner becomes the supervisor
Finally, after the IVA proposal is accepted the insolvency practitioner or the supervisor takes charge of the debtor’s assets. He also administers the IVA schedule on behalf of the creditors and supervises the IVA schedule.
One last note, if the debtor falters in making the monthly payment according to the IVA schedule then the supervisor becomes contractually bound to petition bankruptcy against the debtor.
