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Personal Insolvency

There are two types of insolvency procedure available to the individual depending on his circumstances:-

Bankruptcy

In a bankruptcy the court is officially responsible for making a bankruptcy order against an individual.  Bankruptcy proceedings are always under the control of the court.  A bankruptcy order may be made either on the petition of a creditor or the debtor in either case on the grounds of insolvency, or by the supervisor of an Individual Voluntary Arrangement (IVA) in circumstance where the failure of the IVA makes it appropriate for him to do so.  Once an order is granted it must be advertised in the Belfast Gazette and the bankrupt’s assets fall under the control of a Trustee who is either the Official Receiver or a Licensed Insolvency Practitioner.  The Trustee is then responsible for realising the bankrupt’s assets and distributing the proceeds among the creditors.

Individual Voluntary Arrangement (IVA)

The IVA is a less formal procedure open to insolvent individuals (even those who are already subject to bankruptcy proceedings). The procedure is extremely flexible and its exact nature varies from case to case depending on the terms of the proposal.

By entering into an IVA with the agreement in excess of 75 per cent in value of the creditors who vote on it at a creditors’ meeting, the debtor may be able to order his affairs in a way which benefits his creditors but would not be possible under bankruptcy: for example, by an orderly disposition of assets, introduction of third party funds, contributions from future earnings, or debt rescheduling. The agreement is overseen by a Supervisor, who must be a licensed insolvency practitioner, and is binding on those creditors who had notice of and were entitled to vote at the meeting. An IVA cannot affect the rights of secured or preferential creditors except with their express agreement.

The IVA’s benefits are its flexibility, its lack of publicity compared with bankruptcy, that it may be cheaper to administer for the creditors than a bankruptcy and is therefore likely to increase returns to the creditors. The procedure, introduced in The Insolvency (Northern Ireland) Order 1989, now accounts for about one in six personal insolvencies.

Aside from undertaking IVA appointments to assist individuals, we have carried out negotiations with the Inland Revenue, lenders and other creditors to achieve informal arrangements, which we have then policed, in order to avoid a formal insolvency procedure. In those instances where these negotiations proved unsuccessful, we have put in place an IVA to protect the position of the debtor and avoid bankruptcy.

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