INS10201 - Steps a debtor takes

Individuals

Individuals and the Nominee

A VA is an insolvency procedure. A debtor wishing to propose a VA

• has to be an undischarged bankrupt, or
• able to file their own petition in bankruptcy.

Non-Bankrupts

A non-bankrupt must make the proposal through an IP acting as a nominee. The nominee helps the debtor prepare a proposal and before it is put to creditors has to be able to report to the Court that it has a reasonable prospect of succeeding.

Interim Order

A debtor needing protection from creditors whilst a proposal is being prepared applies to the Court under Section 253 IA1986 ( INS10703) for an interim order—a short-term stay which prevents any creditor from taking recovery action against the debtor. An interim order cannot be obtained while a petition by the debtor is pending and the Court has appointed an IP to make a report.

Since January 2003 it has not been essential to obtain a prior Interim Order.

Undischarged Bankrupts

When the debtor is an undischarged bankrupt

• the debtor, the Official Receiver or Trustee in Bankruptcy may make the proposal
• where an interim order is applied for the Official Receiver’s procedure is identical to that used by a debtor, nominee, or trustee and creditors are able to modify the proposal if they are not satisfied with any of it’s terms
• new procedures which come into force when Schedule 22 of the Enterprise Act takes effect. Under these an Official Receiver can (in low income or low asset value cases) dispense with an interim order and use fast track procedures which offer creditors a ‘take it or leave it’ with no opportunity to modify or compromise.

See the IVA process flow chart at INS10203.

Fast-track IVAs

From 1 April 2004 the OR became able to put forward VAs as nominee and supervisor (S236A IA1986). These are known as fast-track IVAs (FTVA).