The effect of a bankruptcy order on an individual voluntary arrangement (IVA), its assets, and the creditors

Published by a ��ɫ�� Restructuring & Insolvency expert

Practice notes

The effect of a bankruptcy order on an individual voluntary arrangement (IVA), its assets, and the creditors

Published by a ��ɫ�� Restructuring & Insolvency expert

Practice notes

The gap in the insolvency legislation

It is a striking gap in the drafting of the insolvency legislation that the effects of the making of a Bankruptcy order on an Individual Voluntary Arrangement (IVA) are not spelled out in the legislation. The consequences flowing from the making of the order have therefore been derived by the courts.

The starting point is this: where a bankruptcy order has been made, either on a petition brought by the supervisor or a creditor bound by the IVA, the IVA comes to an end. While not spelt out by the legislation, this is implied from the fact that section 276(2) of the Insolvency Act 1986 (IA 1986) provides that any expenses properly incurred in the administration of the IVA should be a first charge on the bankrupt’s estate. The courts have picked up on this.

This can be contrasted with the position where a Bankruptcy petition is brought by a creditor who is not bound by the IVA. In those

Jurisdiction(s):

United Kingdom

Key definition:

Bankruptcy definition

What does Bankruptcy mean?

The court supervised process whereby the assets of an insolvent individual are realised for the benefit of his creditors.

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