There is the option of an individual voluntary arrangement (IVA) which is a formal version of the informal arrangement. An individual voluntary arrangement begins with a formal proposal to the creditors to pay part or all of your debts. The debtor needs to apply to the court and the debtor must be advised by an insolvency practitioner. Any agreement reached with the creditors will be binding on them.

When can you set up an IVA?

It is better and cheaper for the debtor to set up an individual voluntary arrangement before becoming bankrupt but he or she can propose one afterwards.

Who can help you?

For an IVA, the debtor has to find an authorised insolvency practitioner prepared to act as supervisor of the arrangement. Then the debtor may apply to the court for an “interim order”which prevents creditors from presenting, or proceeding with, a bankruptcy petition against the debtor while the interim order is in force. It also prevents them from taking other action against the debtor during the same period without the permission of the court. The debtor does not have to apply for an interim order to put a proposal for a voluntary arrangement to his or her creditors.The insolvency practitioner supervises the arrangement and pays the creditors in accordance with the accepted proposal.

Click here to read 'Employment solicitors explain what to do if your employer becomes insolvent'

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