Before your IVA can start it must be accepted by your creditors. They will review your proposal and make their decision at a Creditors Meeting.
- How is an IVA Accepted?
- Do you have to go to the Creditors Meeting?
- Could your Proposal be modified?
How is an IVA Accepted?
You cannot just start an IVA. For it to become legally binding your creditors must first be given the opportunity to accept or reject your Proposal. Not all of them have to agree. Just 75% (by value) of those who vote must say yes.
For example your total debt may be £18,000 across 5 creditors. Three of them with a total debt of £10,000 vote yes but the others stay silent. This means 100% of those who voted said yes. As such the Arrangement is accepted.
Your IVA can still be accepted even if some creditors say no. For example you may have 6 different creditors in total. If 75% or more of those who vote say yes while the others reject the agreement is accepted and they are all legally bound to it.
Once a majority of voting creditors have accepted your IVA it is legally binding on all of those listed. They must adhere to it even if they rejected or declined to vote altogether.
Do you have to go to the Creditors Meeting?
Your IVA is accepted at a Creditors Meeting. 2-3 weeks before it takes place your Insolvency Practitioner (IP) will send each creditor a copy of your signed Proposal and confirmation of the date it will be held.
The meeting is managed by your IVA Company and will normally be in their offices. All your creditors are invited to attend to discuss your offer and cast their vote.
In reality it is unlikely that the creditors will attend the meeting in person. They normally send their vote back to your IP by letter or e-mail. If you owe money to trade creditors or an individual they might attend but this is rare.
Normally there is no need for you to attend the Creditors Meeting. Your IP will chair it and respond to the creditor’s votes on your behalf.
Could your IVA Proposal be Modified?
If your IVA Proposal has been sensibly prepared it is unlikely that any of your creditors will reject it out of hand. However they may ask you to accept certain changes before they agree.
These changes are known as modifications. A common example is where a creditor feels your living expenses are too high. They will therefore demand that you reduce these and increase your IVA payment. They could also request that the proposed length of the Arrangement is extended.
Your IP will discuss any requested modifications with you. If you are happy to accept them the Arrangement will go ahead. If you cannot agree you can withdraw your Proposal altogether and consider an alternative debt solution.
Your Insolvency Practitioner will not start preparing your IVA Proposal unless they are 99% confident it will be accepted. However this can never be guaranteed until the Creditors have voted.