Individual Voluntary Arrangement (IVA) Failures or Terminations

OK, I will admit that I am not an expert on statistics, but it would seem to me that in the graph shown below, the IVA failure rate is rather high. I would also like to hazard a guess that the companies that administer IVA’s certainly did not loose out. From my research, most companies who offer IVA’s make sure they they get paid before anyone else! I also believe that after that, they do take ongoing fees.

You Qualify for an IVA

You will often see adverts on Facebook and online with “Do You Qualify for an IVA”, like this is some form of “privilege”?? OK, it has to be done and there is no way of getting around this, but at some stage a company will have to have a full financial fact find done on you. I really have to wonder if this is more to the benefit of the company to ensure that they are offering the most profitable solution for them. I could be very wrong, but high failure rates means that something is not right.

Read an IVA Contract Before Signing

I would say that you should not just sit back and believe what you are being told, as this could be a little different to what is written in your IVA contract. There are a a couple of things that you really need to consider:
1. What happens to my property in an IVA?
2. What happens if the IVA fails?

According to one large IVA provider; If you are a property owner undergoing an IVA, it is imperative to conduct a thorough review of your property’s worth in order to determine the possibility of equity. Should there be no equity available, it might be necessary to prolong your IVA by another 12 months. We can delve into this matter more comprehensively during your review and discuss the available options.

So What Can Happen if My IVA Fails

A clause that is commonly found in IVA contract stipulates that the IVA supervisor must initiate bankruptcy proceedings if an individual who is part of the IVA fails to adhere to the agreed-upon terms.

Also in the the book; How Toe Settle Debts with Creditors, A Bankruptcy Association Guide, it say that “The main reasons IVA’s fail……….. “inadequate or incorrect advice is give, be so called professional advisors.” It also goes onto say that, individuals who hold expertise in the field of insolvency practice or law, and even others who have a vested interest in the lucrative fees earned from the promotion of IVA’s. You may also be interested in this document from The Bankruptcy Association site.

Being Made Bankrupt Because IVA Failed

If an IVA fails, it does not always lead to being made bankrupt, but you can be fairly sure that if there is a sniff of more money to be had, you could well be heading down the path of bankruptcy.

“If we do not hear from you in this time we will bring your IVA to a conclusion which could result in us presenting ad petition for your bankruptcy.” You can be fairly sure that the path of bankruptcy will be pursued if there is more money to be had.

Failure to Remedy the Breach

In the event the the breach remains unresolved on expiry of this notice a meeting of creditors will be convened pursuant to Subclause 71(3) of the standard terms and conditions for the purpose of resolving whether to :
i. Issue a Certificate of Termination.
ii. Present petition for your bankruptcy.
iii. Vary the terms of the IVA.
iv. Take no action.

IVA Failed: Can I Stop Being Made Bankrupt

So as you can see, a failed IVA for some people may end up with them being made bankrupt. However, if you do find yourself in this situation, I have known two cases where an IVA failed and they were being made bankrupt. It is still not too late to act and prevent a bankruptcy from taking place! Option 1, discuss the situation with the IVA company to see if the situation can be rectified. Or option 2…………. I have personally known of two cases where bankruptcy proceeding were set in motion:

In many cases the courts are reluctant to make someone bankrupt, but you do have to attend court and plead your case! If you do not attend, you will be made bankrupt.

In both cases where the IVA had failed and the next step was bankruptcy, the people who were facing bankruptcy attended court and put forward a case as to why they should not be made bankrupt. The evidence they provided was, not only how the IVA failure came about, but they also provided information on how they planned to resolve the issue. They had done their own income and expenditure and showed to the court that they could afford to pay creditors X amount each month. In both cases, the judge was satisfied that entering into a Debt Management Plan was a better option.

A Little Advice on Attending Court

More often than not, the actual hearing will take place in a room where there is a long table. The judge will sit at one end and you will be invited to sit on one of the sides. Sometime, if they can be bothered to attend, you will have a solicitor acting on behalf of the IVA company that want to make you bankrupt. You can also if you wish take a friend for support (McKenzie Friend see below). You will probably be nervous, but the judge will be well aware of this and treat you with respect. You may also find that the judge will have a slightly scathing attitude towards the lawyer and correct them when they get things wrong.

You should be respectful and courteous, and don’t be afraid to put your case before the judge, perhaps having the right McKenzie friend will help with this. It is also not unusual for a judge to allow your McKenzie friend to speak. Another tip, before you go the hearing ask the court usher, how the judge prefers to be addressed.

What is a McKenzie Friend

A McKenzie friend is a person who assists a litigant (you) in person, someone who represents themselves in court without a lawyer. McKenzie friends are not legal professionals and are not permitted to address the court or act as an advocate. However, they can provide support and advice to the litigant in person, help them to prepare their case, and take notes during proceedings. The term ‘McKenzie friend’ comes from a 1970 UK court case, McKenzie v McKenzie, in which a husband was allowed to have a friend sit with him during his divorce proceedings to take notes and offer moral support. The use of McKenzie friends has become increasingly common in recent years, particularly in family law cases, where legal aid is often not available, and litigants in person may struggle to navigate complex legal procedures without support.