Personal Insolvency-
Indicators of personal financial difficulty – similar to those of a company
An individual can:
Do nothing and hope that their financial circumstances will improve / the creditors will be
accommodating or docile.
Do a deal with some or all of their creditors.
Declare themselves bankrupt.
Personal insolvency can lead to collective procedures (involving all creditors) & enforcement procedures
(usually led by one or more secured creditors).
Collective procedures are bankruptcy (which is broadly the equivalent of liquidations for
companies) and an individual voluntary arrangement (“IVA”)
Enforcement procedure would be a secured creditor enforcing a charge or mortgage over the
bankrupt’s assets by appointing a receiver.
--
Individual voluntary arrangement: 252 – 263 IA ‘86-
IVAs are particularly useful (if no special circumstances warrant investigation) where some assets are
available immediately for distribution.
-
Basic initial procedure-
Will depend on if an interim order is required
Interim order provides debtor with protection from their creditors from taking action until the
IVA is considered & voted on
o an interim order is more necessary in cases where a risk of independent creditor-led
enforcement action threatens the success of the proposed IVA.
If an interim order is required-
Debtor applies to the court for the interim order – s253 & Rule 8
Debtor makes proposals, (w/ assistance from an insolvencyP /a person authorised by a body recognised
by the SofS for the purpose (and sometimes even after a bankruptcy petition has been presented
against him)
Setting out proposals and details of the intended supervisor of the arrangement (rule 8.3) and
prepares a statement of affairs (full details of his assets and liabilities) (rule 8.5).
The nominee ( insolvencyP who has assisted the debtor with his proposals) submits a report to the court
stating his opinion as to whether the arrangement has a reasonable prospect of being approved and
implemented and whether a creditors’ meeting should be called (s.256).
, The application for an interim order prevents a landlord from exercising any right of peaceable re-entry
and/or distress for rent (without the court’s consent) and court permission is required before a creditor
can take or continue with any action, execution or other legal process against the debtor or his property
(s.254).
If the court thinks it appropriate, the interim order is granted in order to facilitate and implement the
proposals.
The order brings about a moratorium, freezing existing or proposed bankruptcy and other
proceedings and legal process (including execution, landlord’s right of peaceable re-entry and/or
distress for rent) against the debtor, without leave of the court (s.252).
The interim order + moratorium lasts 14 days (s.255(6)) which the court can extend, during which the
nominee must submit his report to the court recommending that the proposals have a reasonable
prospect of being approved and implemented and that creditors’ approval should be sought.
If no interim order is required-
Where the debtor does not require a moratorium
The debtor makes proposals and prepares a statement of affairs - submitted to the nominee (s.256A).
If the nominee thinks the debtor is an undischarged bankrupt or is able to petition for his own
bankruptcy, the nominee submits a report to the court within 14 days after receipt of the proposals and
statement of affairs.
The report gives his opinion as to whether the arrangement has a reasonable prospect of being
approved and implemented and whether a creditors’ meeting should be called.
-
Creditors approval-
Nominee must seek creditor approval for the IVA
approval must be given through one of the statutory creditor decision procedures - s.257(2A)
Every creditor given notice of the debtor’s IVA proposal is entitled to vote on the proposal.
Is approved if at least 75% by value of creditors voting on the decision respond in favour (rule
15.34(6)(a)
not approved if more than 50% (by value) of creditors who are not associates of the debtor vote
against it (s.258 and rule 15.34(6)(b)).
Secured creditors’ rights to enforce their security and preferential creditors’ rights to their preferential
position cannot be affected without their consent (ss.258(4) and 258(5)).
-
Effect of approval -
Approval of the IVA binds all creditors who were given notice of, and entitled to vote
Indicators of personal financial difficulty – similar to those of a company
An individual can:
Do nothing and hope that their financial circumstances will improve / the creditors will be
accommodating or docile.
Do a deal with some or all of their creditors.
Declare themselves bankrupt.
Personal insolvency can lead to collective procedures (involving all creditors) & enforcement procedures
(usually led by one or more secured creditors).
Collective procedures are bankruptcy (which is broadly the equivalent of liquidations for
companies) and an individual voluntary arrangement (“IVA”)
Enforcement procedure would be a secured creditor enforcing a charge or mortgage over the
bankrupt’s assets by appointing a receiver.
--
Individual voluntary arrangement: 252 – 263 IA ‘86-
IVAs are particularly useful (if no special circumstances warrant investigation) where some assets are
available immediately for distribution.
-
Basic initial procedure-
Will depend on if an interim order is required
Interim order provides debtor with protection from their creditors from taking action until the
IVA is considered & voted on
o an interim order is more necessary in cases where a risk of independent creditor-led
enforcement action threatens the success of the proposed IVA.
If an interim order is required-
Debtor applies to the court for the interim order – s253 & Rule 8
Debtor makes proposals, (w/ assistance from an insolvencyP /a person authorised by a body recognised
by the SofS for the purpose (and sometimes even after a bankruptcy petition has been presented
against him)
Setting out proposals and details of the intended supervisor of the arrangement (rule 8.3) and
prepares a statement of affairs (full details of his assets and liabilities) (rule 8.5).
The nominee ( insolvencyP who has assisted the debtor with his proposals) submits a report to the court
stating his opinion as to whether the arrangement has a reasonable prospect of being approved and
implemented and whether a creditors’ meeting should be called (s.256).
, The application for an interim order prevents a landlord from exercising any right of peaceable re-entry
and/or distress for rent (without the court’s consent) and court permission is required before a creditor
can take or continue with any action, execution or other legal process against the debtor or his property
(s.254).
If the court thinks it appropriate, the interim order is granted in order to facilitate and implement the
proposals.
The order brings about a moratorium, freezing existing or proposed bankruptcy and other
proceedings and legal process (including execution, landlord’s right of peaceable re-entry and/or
distress for rent) against the debtor, without leave of the court (s.252).
The interim order + moratorium lasts 14 days (s.255(6)) which the court can extend, during which the
nominee must submit his report to the court recommending that the proposals have a reasonable
prospect of being approved and implemented and that creditors’ approval should be sought.
If no interim order is required-
Where the debtor does not require a moratorium
The debtor makes proposals and prepares a statement of affairs - submitted to the nominee (s.256A).
If the nominee thinks the debtor is an undischarged bankrupt or is able to petition for his own
bankruptcy, the nominee submits a report to the court within 14 days after receipt of the proposals and
statement of affairs.
The report gives his opinion as to whether the arrangement has a reasonable prospect of being
approved and implemented and whether a creditors’ meeting should be called.
-
Creditors approval-
Nominee must seek creditor approval for the IVA
approval must be given through one of the statutory creditor decision procedures - s.257(2A)
Every creditor given notice of the debtor’s IVA proposal is entitled to vote on the proposal.
Is approved if at least 75% by value of creditors voting on the decision respond in favour (rule
15.34(6)(a)
not approved if more than 50% (by value) of creditors who are not associates of the debtor vote
against it (s.258 and rule 15.34(6)(b)).
Secured creditors’ rights to enforce their security and preferential creditors’ rights to their preferential
position cannot be affected without their consent (ss.258(4) and 258(5)).
-
Effect of approval -
Approval of the IVA binds all creditors who were given notice of, and entitled to vote
