Established and administered by Part VIII of the Insolvency Act of 1986, the IVA is a repayment proposal made to the debtor's creditors via an Insolvency Practitioner. The Insolvency Act of 1986, enacted by the British Parliament, regulates cases involving personal and corporate insolvency and Individual Voluntary Arrangements. It serves as a forum for all issues concerning corporate and personal insolvency in the United Kingdom.
IVAs were originally intended as a remedy for business insolvency issues, but rising consumer debts among UK residents compelled them to seek protection under IVA on a personal level. As the IVA is a contractual agreement with the creditors, it can be tailored to the individual's financial situation.
All of the debtor's financial assets and capabilities are taken into account when preparing the IVA contract. During the preparation of the Individual Voluntary Arrangements proposal, the debtor's regular income, savings and investments, income from third parties, and assets like endowment policies are considered. To gain approval for the IVA proposal, a meeting with the creditors' commission is arranged. In order for the IVA agreement to be approved, at least 75% of the voters (in person or by proxy) must grant their approval. However, if any of the voters are found to be personal or professional associates of the debtor, a second round of voting is conducted in which the consent of 50% of the non-associated creditors is sought.
Individual Voluntary Arrangements protect a debtor from the stigma associated with bankruptcy and, over time, enhance his credit score. Additionally, it permits a debtor to obtain credit, unlike bankruptcy. In contrast to bankruptcy, which dissolves company partnerships and prohibits a debtor from serving as a company's director, IVA contains no such provisions. However, the greatest advantage of an IVA over bankruptcy is that the insolvent can retain control of his residence even after signing an IVA proposal.""
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