Example of an Individual Voluntary Arrangement (IVA) Proposal

What does an Individual Voluntary Arrangement (IVA) Proposal look like?

An IVA (Individual Voluntary Arrangement) Proposal looks something like the following example:



Name of debtor: JOHN MICHAEL SMITH ("the Debtor")


Name of Nominee: Ray Purnell,Purnells., Chartered Accountants, 3 Gold Tops Newport, S. Wales NP20 4PG

Telephone: 01633 - 214712
Fax: 01633 - 246599

Date of Proposal: 19TH NOVEMBER 2010

1. Introduction (Rule 5.3(1))

The Debtor consulted an insolvency practitioner on the 1st September 2001 and has been advised to make a voluntary arrangement proposal to his creditors.

The debtor has been in PAYE employment as a sales person for a kitchen company for the last six years.

He has lived at his current address for 2 years and pays a monthly rent of £360.

In 2000, the Debtor was promoted to Sales Manager with a basic salary of £25,000 plus bonus. As the Debtor did not reach the sales budget, he did not receive a bonus.

At the beginning of this year, 2001, the Debtor was demoted back to Senior Sales Person and is currently earning a salary of £12,000 plus commission.

The debtor is proposing to make monthly contributions of £480 into a voluntary arrangement over a period of 36 months.

The Debtor's estimated income and expenditure is shown at Schedule 4 attached.

It is considered that the creditors may agree with this proposal on the following grounds:

(a) That the realisation and distribution of funds will take place more speedily than under bankruptcy proceedings. In a bankruptcy, it is unlikely that any dividend would become payable as the Debtor would have little motivation to work the long hours needed to earn a bonus.

(b) Legal and administrative costs will be less than those which would obtain in a bankruptcy. The Secretary of State's fee of 15% on all realisations in a bankruptcy does not apply to voluntary arrangements.

(c)The arrangement will be more cost effective as it avoids the involvement of the Insolvency Service and the consequential high cost of fees involved.

(d)Interest may be earned on the realised assets and utilised for the benefit of creditors thus avoiding funds being deposited at a Nil rate of interest at the Bank of England as would be the case under a bankruptcy.

2. Proposals (Rule 5.3(2))

2.1 Schedule 1 of this Proposal details all of the assets of the Debtor, showing estimated gross and net realisable values (after deducting amounts due to secured creditors).

2.2 No assets are to be excluded from the arrangement apart from the Debtor's household furniture.

2.3 No assets other than the property of the Debtor are to be included in the arrangement.

2.4 Schedule 2 details all known liabilities to be included in the arrangement. It is proposed to deal with the claims of secured creditors as follows:-

  • Secured creditors will rely on security and claim as unsecured for any shortfall.
  • It is accepted within this arrangement that the secured creditor may revalue his Security at any time.

It is proposed to deal with the claims of preferential creditors as follows:

  • Preferential creditors will enjoy the same priority as would obtain in a bankruptcy. (There are however, no known preferential creditors).

It is proposed that the claims of unsecured creditors be dealt with as follows:-

  • Unsecured creditors will rank pari passu for payment. Creditors whose claims have been inadvertently omitted from the arrangement and whose total debts do not exceed 10% of the total claims lodged will be invited to claim in and be bound by the arrangement. Provided however, that they do not disturb any dividend already paid but can make up lost dividends from any future realisations.

2.5 The debtor does not owe monies to any associates.

2.6 The Debtor is unaware of any circumstances which in the event of his bankruptcy might give rise to claims under S.339 (transactions at an undervalue), S.340 (preferences) or S.343 (extortionate credit transactions).

2.7 No debts have been guaranteed by any other persons.

2.8 It is proposed that the arrangement shall be completed as soon as possible following realisation of assets, agreement of claims and distribution to creditors, but if for any reason the Supervisor requires to prolong the arrangement he shall have power to do so.

2.9 The proposed distributions to the creditors will be as follows:

Estmated Date: 36 months from approval

Amount Payable: £13,370

To: Preferential creditors - Nil

To: Unsecured creditors - 30.4p in £

A reconciliation is shown at schedule 3, detailing the total amount to be realised into the arrangement, less costs of the arrangement, to provide the net figure being the distributable amount shown above.

Any creditor who has not lodged his claim having received 21 days' notice will be excluded from that dividend, but if lodging claim late will be entitled to make up that amount from future realisations.

This schedule of payments is subject to the best estimate presently available of the time scale for agreement of claims and realisation of assets. Creditors are asked to note that the extent that the aggregate value of claims in any particular class of creditor may differ from the amounts shown in Schedule 2, then the rate of each distribution may vary, but the cash amount to be comprised in each distribution is intended to be met.

2.10 It is proposed that the Nominee should receive £1,000 plus VAT by way of remuneration and expenses.

The Nominee will also be entitled, to any costs and disbursements including legal costs, which he incurs in connection with any appeal following from the Meeting of Creditors, unless the Court orders otherwise.

2.11 It is proposed that the Supervisor's out of pocket expenses and disbursements should be met out of the realisations under the arrangement as and when incurred, or when funds so permit.

The Supervisor will recover as expenses £1.00 for each letter sent and £25.00 for the cost of a record book and £80.00 for making space available for each creditors meeting during the life of the arrangement.

The Supervisor's remuneration shall be calculated by reference to the time spent by the Supervisor and his staff.

The Supervisor's fees and expenses shall rank ahead of the claims of creditors, and after any costs payable to the Nominee.

The Supervisor will be entitled to be reimbursed his own costs and any other expenses incurred in bringing, or defending any action in the arrangement, unless the Court orders otherwise.

2.12 No guarantees have been offered by third parties in respect of the proposed arrangement.

2.13 The Supervisor shall open a current account at Notown Bank and all realisations shall be promptly paid into such accounts. The Supervisor shall have discretion to invest funds surplus to the immediate requirements of the arrangement on deposit or money market from time to time, pending any distribution of such funds.

2.14 If upon termination of the arrangement any funds held for the purposes of payment to creditors remain in the hands of the Supervisor because any creditor (a) has failed to claim at all, or (b) has not cashed any cheque forwarded to him, or (c) can no longer be traced.

Or, if after the voluntary arrangement has been concluded, the then former Supervisor receives funds which were not anticipated to have been receivable at the time of closure, such funds will be dealt with as follows:

If the aggregate of such funds after costs exceeds £1,000, a further distribution shall be made to those creditors who are able to participate therein, less the (former) Supervisor's outstanding time costs and disbursements, if any. If such funds, however, amount to less than that amount, the costs of distribution are not justified and accordingly, the balance will be returned to the Debtor after deducting any amounts outstanding for any outstanding time costs and disbursements of the (former) Supervisor.

2.15 The Debtor is in PAYE employment.

2.16 No further credit facilities are intended to be arranged for the Debtor in the proposed arrangement.

The Debtor will be personally responsible for any liabilities which he incurs in the course of the arrangement and for satisfying any accounting requirements in connection with his new business.

2.17 The Supervisor's functions shall be:-

(a) To receive all funds payable into the arrangement.

(b) To make distributions to the creditors in due order of priority.

(c) To retain solicitors, agents, or other professional advisers if required for the beneficial purposes of the arrangement, at the expense of the estate.

(d) To report to creditors as to the progress of the arrangement from time to time.

(e) To realise all assets comprised in the arrangement.

(f) To authorise the release of funds from the estate to defend disputed claims where appropriate.

2.18 It is proposed that the Supervisor of the arrangement shall be Raymond Henry Purnell, Chartered Accountant of Purnells of Norwich House, 1/2 Gold Tops, Newport, S. Wales. Mr Purnell is qualified to act as an insolvency practitioner in relation to the Debtor.

2.19 The Debtor acknowledges that he commits an offence if he makes any false representation to the creditors in this proposal or at any meeting of creditors for the purposes of obtaining the creditors approval to this proposal, punishable by imprisonment or a fine, or both.

2.20 The statement of affairs in Schedule 3 indicates that all creditors should be paid in part.

3. Realisation of Assets

It is proposed that the assets be realised in the following manner:-

3.1 The Debtor proposes to make 36 monthly payments of £480 into the voluntary arrangement totalling £17,280.

3.2 The Debtor owns a Rover car which is on Hire Purchase with A Bank Plc. The Debtor proposes to now return the vehicle to the finance company.

3.3 The Debtor owns a pension policy with B Bank Plc. There is a small fund of £500 which has been frozen. It is proposed to exclude this policy from the arrangement.

3.4 If the creditors are paid in full any surplus after the costs of this arrangement will be returned to the Debtor.

4. Variation Clause

If after this voluntary arrangement has been approved it becomes necessary to consider a variation or variations to the terms agreed, it is proposed that any such variation will be valid if:

4.1 At least 14 days notice is given to creditors. At such a meeting rule 5.18 (1) of the Insolvency Rules 1986 shall apply.

4.2 The majority vote required to approve any such variation will be 75% in value of those voting personally or by proxy at the creditors meeting.

5. I, JOHN MICHAEL SMITH, the above-named Debtor hereby confirm that this document fairly sets out my proposals to my creditors for a voluntary arrangement and that to the best of my knowledge and belief all statements herein are true. I further acknowledge that although I have received professional assistance in drafting the proposal, its contents remain my sole responsibility, and the implications of all proposals have been carefully explained to me.

In the event of my death, my personal representatives will be bound by the arrangement in so far as the realisations of existing assets are concerned, but the personal representative could not be responsible for making any monthly payments.

Dated this 19TH day of NOVEMBER 2001


(The Debtor should sign each page and schedule of the proposal).

I received the written notice on 19TH day of NOVEMBER 2000

R H PURNELL:......................................................................................................

I consent to act as Nominee and Supervisor and I consent to the making of an Interim Order without attendance.

R H PURNELL:.....................................................................................................

Schedule 1

Statement of Affairs as at 19th November 2001

Assets Specifically Pledged 
:Vehicle - Rover5,850
Less: Finance(10,917)
Assets Not Specifically PledgedNil
Less: Preferential CreditorsNil
Less: Unsecured Creditors 
Per Schedule38,930
Shortfall on Hire Purchase5,067
Overall Deficiency(43,997)

1. The Debtor proposes to return the vehicle to the Finance Company.

Schedule 2

Schedule of Unsecured Creditors - John Michael Smith

CreditorPer Statement of Affairs
Creditor 1500
Creditor 27,519
Creditor 33,248
Creditor 48,912
Creditor 5736
Creditor 66,707
Creditor 7650
Creditor 83,378
Creditor 9350
Creditor 101,676
Creditor 115,254
Per Statement of Affairs38,930

Schedule 3

Comparison to show the amount which would become available in a Voluntary Arrangement as compared with a Bankruptcy.

 BankruptcyVoluntary Arrangement
Realisable Amount    
36 months x £480 Nil 17,280
Available for dividend
Less: Fees in an IVA
Solicitors fees- 350 
Nominees fees- 1,000 
Supervisors fees- 2,000 
Disbursements- 500 
Bordereau- 60 
  Nil 3,910
Comparative distributable amounts Nil 13,370
Realisable as follows    
Preferential creditors Nil Nil
Secured creditors Totalling £43,997 Nil 13,370
Aggregate return to unsecured creditors Nil p 30.4p

Schedule 4

Statement of monthly income and expenditure.

 Monthly ExpenditureMonthly Income
Estimated annual gross basic income 12,000
Estimated annual gross commission 15,500
Less: Estimated PAYE and NI thereon 7,700
Estimated Net Annual Income 19,800
Monthly net income 1,650

Personal Commitment -

(food, rent, clothes etc1,170 
Monthly Surplus 480

Your Individual Voluntary Arrangement (IVA) Proposal would not look like this example. All the law says is that an IVA must contain certain information - The law does not say what offer should be made under the Individual Voluntary Arrangement proposal. Your IVA Proposal would be specifically created to address your individual personal circumstances.

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