As an alternative to a bankruptcy order, the debtor may attempt to make a voluntary arrangement with their creditors. To do this, the debtor has to find an insolvency practitioner who is willing to assist them in drawing up proposals and to supervise their implementation once they receive approval from the creditors. The insolvency practitioner is known as the debtor's nominee.
Once the debtor finds their nominee, they have to prepare a statement of affairs and apply to the court for an interim order to stop any other proceedings being taken against them while their creditors are considering the voluntary arrangements proposals.
While the interim order is in force, no bankruptcy petition can be presented or proceeded with, without the permission of the court. Further, no other proceedings can be commenced or continued against the debtor or their property.
The nominee would then prepare a report for the court, advising whether there are any realistic proposals to be made and whether it is worth calling a meeting of creditors.
If, at a meeting of creditors, three-quarters or more of the creditors in value approve the proposals, every ordinary, unsecured creditor who had notice of the meeting and was entitled to attend and vote is bound by the decision of the meeting. Preferential and secured creditors are bound by the proposals only if they agree to it.
The nominee is responsible for supervising the implementation of the voluntary arrangement. If the debtor fails to comply with the arrangement or if it transpires that the creditors were persuaded to accept the proposal by means of false or misleading information, the nominee or creditor can petition for the debtor's bankruptcy.