Individual voluntary arrangements are stipulations between a debtor and a creditor to pay off any outstanding debts that stand between them. This is quite similar to a bankruptcy procedure but with quite a few differences.
Bankruptcy versus IVA
The main difference between IVA procedures and bankruptcy cases is the location and the facilitator of the agreements between debtor and creditor. In a Bankruptcy case, a specialized court called the Bankruptcy Court handles the proceedings. In an IVA proceeding, however, one can just simply file a petition with the state country court where he resides in.
Second, in a bankruptcy proceeding, liquidation or reconstruction of your debts is done by a Court or creditor-appointed Trustee. In an IVA proceeding, you are advised via an insolvency partner of your choosing.
Lastly, in a bankruptcy proceeding, a petitioner may be required to pay off all his debts following a plan, which range for several years on end. However, in an IVA, the petitioner can pay off a certain amount for a period of 3 to 5 years, and the rest are then written off.
What Happens When One Files for an IVA?
The procedures are almost always the same. Once a petition for an IVA has been filed and approved with the state county court, all attempts for collection of your debt are then stayed by the court. Your creditors are then notified of your filing of an IVA and are summoned to a meeting with you and your insolvency partner to work out a payment plan.
Before that, however, all or majority of your creditors should agree to the enforcement of an IVA. Majority is defined as 75% of your outstanding creditors. Just like in a bankruptcy proceeding, if they do not agree to the IVA then you have no case to push through and collections resume.
Things to Watch Out Before Filing an IVA
Just like each individual chapter of bankruptcy, an IVA is not at all suited for everyone. Before you file a petition for an IVA, you have to assess first if this will not prove to be detrimental to your financial status.