An insolvency is a formal and legal procedure designed to get debts repaid, mediating between insolvent companies or individuals (debtors) and the businesses whom the debt is owed to (creditors). In personal insolvency, creditors are contacted by insolvency practitioners seeking the approval of Individual voluntary arrangement (IVA) proposals.
Insolvency Practitioners (IPs) are licensed individuals who liaise between the parties involved, and they play a vital role in bringing balance to the debt space: allowing individuals in debt to get back on their feet through debt relief, while seeking to return (partially or entirely) what is owed to creditors.
Creditors ought to be able to lend or trade with the confidence that their investment will return. When the confidence is lacking and creditors believe that individuals will not be able to repay their debts, lending becomes more restricted and the cost of transactions can increase for everyone. This is why personal insolvency processes ought to keep creditors’ interests in mind; seeking the right balance between relieving debt for individuals and providing returns to creditors.
For creditors, losing money that is owed by companies or individuals can be stressful and time-consuming. Insolvency procedures can help creditors in providing an understanding of the situation and what the return can be.
Creditors and IVAs
In personal insolvency, an Individual Voluntary Arrangement (IVA) is an alternative for debtors to bankruptcy. It is a formal binding agreement between an individual (the debtor) and their creditors, typically based on making manageable payments to pay all or part of the debt, without incurring further interest.
In an IVA scenario, Insolvency Practitioners put together a proposal for creditors where they set out the repayment plan and state how much the debtors can realistically pay back. The IP is known as the ‘nominee’ (under insolvency law) for the proposed arrangement, and as such, he ensures that creditors receive all the information they need to decide whether to approve the arrangement.
The involvement of Creditors in the IVA process
With the IVA proposal ready, a decision process starts to enable creditors to vote via a virtual Meeting of Creditors; they can accept the proposal with or without changes, or reject it. Creditors can complete a proxy form to submit their votes, which must be submitted by the deadline specified, and must be supported by a Proof of Debt form (POD).
There is a two-stage process to succeed in the decision procedure:
- The IVA needs to be supported by 75% or more of creditors by value voting at the meeting, and;
- Less than 50% by value of non-associated creditors vote against the proposal.
When the proposal is approved, the IVA binds all creditors, whether or not they have voted in favour or at all, and the IP assumes the role of ‘supervisor’.During the IVA process, creditors receive documentation from IPs and are also asked to provide information in return:
- A copy of the IVA proposal and corresponding paperwork is shared for the creditor to submit votes.
- A copy of the IP’s comments and recommendations to creditors with regards to the proposal
- Notification of whether the proposal has been accepted and whether any modifications have taken place.
- Request for details of the creditors’ claim and notification about the payment of dividends
- Reports (annual reports and a final report, upon completion of the arrangement)
Improving the exchange of documentation between Creditors and IPs
Traditionally, the exchange of information between IPs and Creditors has been largely paper-based, involving postage and manual processes. With the digital revolution, however, new technologies are emerging to streamline the process, save money and reduce time.
IPs can upload all documents and information relevant for creditors using a secure platform, such as Aryza Connect Hub – technology designed by Aryza, set to revolutionise the way creditors interact with insolvency firms.
Aryza Connect Hub is a cloud-based application dedicated to creditor communication and file management. IPs can post all relevant case information to creditors directly from the Aryza Advize CRM; assign files to creditors and make use of tags to help identify documentation.
When files are posted, creditors can login to Aryza Connect Hub to access documents, and;
- See files assigned to creditors
- Search records using handy filters: by number of case, creditor name, source or tags
- Download up to 10 files at a time
- Submit votes, claim amounts and modifications on proposals
- Upload proxy forms and POD
- Receive notifications to keep up to date with case progress, documents and reports.
We are also developing an open API for creditors to integrate with their own systems.
A fully digital process with Aryza Connect Hub and Aryza Advize’s IVA Module
With a revised Meeting of Creditors within Aryza Advize’s IVA functionality and Aryza Connect Hub, we are digitising the entire IVA process for creditors and transform the way they interact with insolvency firms.
The considerable amount of paperwork required for every insolvency case will no longer be an issue – the portal streamlines file exchange and communication, reducing costs and time for IPs, and making the process for creditors a slick and simple process.