Individual voluntary arrangements
This is a formal version of the arrangement described above. An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. There is a requirement for an insolvency practitioners' report to the High Court so you will need the help of an insolvency practitioner. Any agreement reached with your creditors will be binding on them.
How does it work?
- First, find an authorised insolvency practitioner prepared to act for you as supervisor of the arrangement. (The High Court can give the names of local practitioners.) A list is also available for you to look at the Official Receiver's office or by clicking ·here. If you are already bankrupt then the Official Receiver may be able to act as the supervisor of an arrangement.
- Then you may apply to the Court for an "interim order". This prevents your creditors from presenting, or proceeding with, a bankruptcy petition against you while the interim order is in force. It also prevents them from taking other action against you during the same period without the permission of the Court. You do not have to apply for an interim order to put a proposal for a voluntary arrangement to your creditors.
- The insolvency practitioner tells the Court the details of your proposal and whether in his or her opinion a meeting of creditors should be called to consider it.
- If a meeting is to be held, the date of the meeting and details of the proposals are sent to your creditors. Where the creditors' meeting approves your proposal this will bind every creditor who received, or who was entitled to receive, notice of the meeting.
- At the meeting, the creditors vote on whether to accept your proposals. If enough creditors (over 75% in value of the creditors present in person or by proxy, and voting on the resolution) vote in favour, the proposals are accepted. They are then binding on all creditors who had notice, or were entitled to receive notice, of the meeting.
- The insolvency practitioner supervises the arrangement and pays the creditors in accordance with the accepted proposal.
What will an individual voluntary arrangement cost?
You should ask several practitioners what they charge before you ask any of them to act for you. Insolvency practitioners are usually accountants, some are solicitors and their fees are similar to those charged by members of these professions for other kinds of work.
When can you make an individual voluntary arrangement?
It is better and cheaper for you to set up an individual voluntary arrangement before you become bankrupt but you can propose one afterwards. If you do propose an individual voluntary arrangement after bankruptcy, it is possible for you to nominate the Official Receiver to be the supervisor of the arrangement. This type of arrangement is called a fast-track voluntary arrangement and is only suitable in certain cases.
A separate publication called "Fast-track voluntary arrangements" is available, to view click here.
Are there any restrictions?
Generally speaking no, but the Court cannot make an interim order if you have applied for one in the previous 12 months. There is no maximum or minimum level of debt and no maximum or minimum level of repayments, except what is acceptable to your creditors. An arrangement might particularly suit you if:
- you have friends or relatives prepared to help pay or contribute towards paying your debts;
- your income enables you to pay regular sums to creditors.
What are the advantages of an individual voluntary arrangement compared to going bankrupt?
- It gives you more say in how your assets are dealt with and how payments are made to creditors. You may be able to persuade your creditors to allow you to retain certain assets (such as your home). You will obviously have to act responsibly and flexibly in order to reach agreement with your creditors.
- You avoid the restrictions which apply to a bankrupt.
- Because you will not have to pay some of the fees and expenses which are charged in a bankruptcy, the overall costs are likely to be less.
Can an individual voluntary arrangement be proposed by a member of a partnership?
Yes. You can propose an individual voluntary arrangement on your own which must take into account the claims that the creditors of the partnership have against you personally. It will not affect the rights of the partnership creditors to take action against the partnership itself or against any other partner.
Alternatively, you and your partner(s) may wish to propose an arrangement involving the partnership creditors and the personal creditors of the partners. This can be done in two ways:
- the partners may propose interlocking voluntary arrangements, with each partner making proposals for their own debts and the debts of the partnership; or
- the partnership may propose a partnership voluntary arrangement (usually accompanied by voluntary arrangements for each partner).
An authorised insolvency practitioner must help you to make proposals to creditors. He or she will be able to advise you which procedure to follow.
Warning: If you enter a voluntary arrangement but fail to give full details of your assets and debts or fail to do what you have agreed under the arrangement, then the insolvency practitioner, or any creditor bound by it, may still petition for your bankruptcy.
