Your creditors will normally accept an IVA as long as the payment you offer is reasonable. However they do not have to agree to it.
- Why will Creditors accept your IVA Proposal?
- Do they all have to agree?
- When do Debt Collection actions stop?
- What if your IVA is not accepted?
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Why will my creditors accept my IVA?
Your creditors will normally accept your Individual Voluntary Arrangement (IVA) if the proposal is reasonable. Why are your creditors prepared to write off some of your debt? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement/how-to-start-individual-voluntary-arrangement
Why will Creditors accept your IVA Proposal?
You cannot apply for an IVA yourself. It has to be proposed to your creditors by an Insolvency Practitioner (IP). Your IP will present a Proposal summarising your finances and what you can afford to repay.
Because you are using an IP your creditors trust that you are offering to pay as much as you can afford. Even so they review your income and living expenses closely to make sure your offer is reasonable and as high as possible.
Your Proposal also includes a comparison to Bankruptcy. This clearly shows your creditors would get less if you went bankrupt compared to carrying out an IVA. As such they will normally accept a reasonable Proposal.
If you are up to date with your debt repayments your creditors will still consider an IVA. They will be able to see from your Proposal the only way you have managed to keep paying is by borrowing more.
Do all of your Creditors have to agree to the IVA?
All your creditors will be invited to accept your IVA Proposal. They can accept or reject. However not all of them have to agree.
For the Arrangement to be accepted 75% of the value of the creditors who choose to vote must say yes. This means that one or more could say no. However as long as the majority say yes it is accepted.
E.g: You have four creditors each owed £10,000. If only one votes and they say yes then 100% of voting creditors have said yes. The agreement is then accepted.
If one of your creditors is owed 75% or more of your total debt they have to say yes for the IVA to be accepted. Given they say yes it will be accepted irrespective of what the others think. If they say no the Arrangement cannot go ahead.
Once an IVA is accepted all the creditors included in it are legally bound. This is the case even some chose to reject. Rejecting creditors are then forced to accept its terms.
Do all your Creditors have to agree to your IVA?
Not all of your creditors have to agree to your Individual Voluntary Arrangement (IVA) for it to be accepted. What percentage of the creditors have to agree? What happens if any creditors say no? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement-frequently-asked-questions/what-happens-if-my-iva-is-rejected
When do Debt Collection actions stop after an IVA is Accepted?
Once you have decided to start an IVA it normally takes between 6 and 8 weeks to put in place. During this time it is unlikely you will be able to continue paying your creditors. As such they may continue debt collection actions against you.
If you are contacted by any of your creditors you should tell them you are in the process of making your application. Ask if they will put your account on hold to give you time to do this. Most will do so.
Some of your creditors may continue to hassle you even after you have spoken to them. If so there is very little you can do. However once your IVA is accepted they have to stop.
Once your IVA is accepted your creditors are legally obliged to stop their collections activities. It may take a month or so for them to update their systems. However if they persist you can report them to your IP.
What if your IVA is not Accepted by your Creditors?
Given your IVA proposal is reasonable it would be unusual for any of your creditors to simply reject it outright. However one or more of them could request changes. These are known as modifications.
These could be in relation to the amount of your monthly payments, the length of the Arrangement or how your property is dealt with if you are a home owner.
Where a modification is put forward you have the choice of whether to accept it or not. If you say no the creditor will reject the proposal. If you owe them a significant portion of your total debt this may mean your whole IVA is rejected.
If your creditors reject your IVA or you are unable to agree to their modifications the Arrangement cannot be accepted. You may then need to consider a different debt solution.
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How often are IVA applications rejected at the creditor meeting
Hi David
This is a difficult question to answer as there are no formal statistics. I would say it very much depends on the IVA company you are using. Each will have different rates of success. However if you are working with a reputable firm and the proposal is constructed correctly then as highlighted above the risk of rejection should be relatively low.
It is useful to remember that the IVA company does not get paid unless the IVA is accepted and the client starts paying. Given the amount of work involved with producing and agreeing an Arrangement companies could not survive unless the majority were accepted.
The main examples of rejection I come across are where individuals have more specialist needs. For example if someone owes money to HMRC. HMRC will expect to see an IVA proposal constructed in a certain way with the relevant paperwork available. Some consumer oriented IVA companies not specialising in this area can get this wrong leading to these proposals being rejected.
I’m a creditor via court…I wasnt told about the arrangement until it had been passed. Therefore, I opposed it. I own more than 75% of the debt. The IVA company still choose to go ahead without my consent.
Can they do this I put a complaint in within the 28 days complaint policy.
Hi Elizabeth
If you are a creditor and you believe that an IVA has been passed without giving you the legal opportunity to reject then yes of course you can appeal and the IVA should be overturned. An IVA can’t become legally binding unless all listed creditors have been given sufficient notice and time to reject if they wish.