If an Individual Voluntary Arrangement (IVA) is agreed your creditors will normally be obliged to write off debt that you are unable to afford to repay. Because of this you cannot simply start the solution. First they must be given the opportunity to accept it or reject. However if a creditor rejects this does not mean that it cannot be used.

Generally speaking your IVA will be accepted if your offer of payment is reasonable and your monthly living expenses are within the creditor’s expenditure guidelines. However no-one can give you a guarantee that it will be accepted until your creditors have voted.

Not all creditors have to accept an IVA

If a creditor rejects your IVA proposal this does not necessarily mean that it cannot be put in place. Under the rules only 75% of the value of the creditors who vote on the Arrangement have to accept it.

This means that if you have ten creditors and only one of these votes and says yes the others are all legally bound. The IVA is put in place and they have to abide by it even though they did not vote at all.

In the same way if one or more creditors actually reject the proposal but others who total 75% or more of the value of the debt vote yes the IVA will be accepted. This rule means that it is unlikely that your IVA will be rejected if your payment proposal is reasonable.

What are your options if your IVA is rejected?

If a creditor rejects your proposal who are owed 25% or more of the total value of the debt the whole arrangement will be rejected. If this happens then there is no way the arrangement can go ahead even if other creditors voted yes to it.

As such, it is always sensible to understand your options in the unlikely event that the arrangement cannot be put in place. In this situation you can consider an alternative debt management solution such as a Debt Management Plan or Bankruptcy.

If you are not a home owner and have no other significant assets to lose your best option might be bankruptcy as you will only have to make payments towards your creditors for three years after which you would be debt free.

BMD Tip: If your IVA is rejected you will not be forced to go Bankrupt. In fact your creditors will prefer you not to choose this solution as if you do they will lose control of the debt collection process and usually receive little if any of the debt they are still owed.