An Individual Voluntary Arrangement (IVA) is a debt solution which involves yourself and your creditors coming to a legally binding agreement to extend your loan term and make reduced monthly repayments over this new timeframe. In order to officially set up an IVA, you will need to obtain the services of an insolvency practitioner, who will then manage your IVA and convene a meeting of all your creditors. The meeting will be used in order to make your proposal to set up an IVA, and you will need 75% of your creditors (by value) to accept your application in order for all of them to be legally bound and your IVA officially enacted.
The following page will outline how the meeting with your creditors work, what you need to secure in order to have your IVA set up and the answers to some frequently asked questions we have received surrounding this area.
IVA proposal meeting with your creditors
After you and your insolvency practitioner have devised your IVA proposal, they will convene a meeting of all your creditors you owe outstanding debt to that you wish to include in your IVA. This meeting will typically take place in the insolvency practitioner’s office and it is recommended that you are present at this meeting so you can convey your aims more insightfully. However, if there is a reason why you cannot be at the office during the meeting, it is also possible to participate via teleconference.
Your creditor’s will usually be present personally or will dispatch a representative on their behalf to consider your cash.
At the meeting, your insolvency practitioner will pitch your IVA application to your creditors, who will decide whether to authorise it or not. Most lenders in the country voluntarily signed up to the IVA protocol which consists of a standard procedure about how an IVA proposal must be devised. Creditors should authorise any proposal which has been devised in accordance with the terms of the protocol and will not request for any modifications to be made to it.
At the end of the proposal, all of your lenders will cast their vote about whether they are happy with you setting up an IVA or not.
Can my lenders request that I make medications to my IVA proposal?
All of your creditors are entitled to request alterations to be made to your proposal, though you also have the power to decide whether you accept these modifications or not.
Do all my lenders have to accept my application?
In order for your IVA to be officially set up, it is not necessary to obtain the permission of all of your creditors. As long as you attain the consent of over 75% (by value) of your lenders who are involved with the consideration of your application, your IVA will be accepted and the rest will be legally bound to its terms and conditions. This process is entitled the requisite majority.
You currently owe £60,000 worth of debt to four creditors.
Creditor 1 – Is owed £25,000
Creditor 2 – Is owed £20,000
Creditor 3 – Is owed £15,000
Creditor 4 – Is owed £5,000
In this example, even if both creditor 3 and 4 reject your application to set up an IVA, it will be irrelevant if both creditor 1 and 2 accept it. This is because collectively, the two comprise £45,000 of the £60,000 you owe, which equates to 75%. Thus, in this scenario both creditor 3 and 4 would be legally bound to the terms of your IVA and it will be enacted immediately.
Can I appeal the proposal decision my creditors make?
It is possible for yourself, your presiding insolvency practitioner or your lender to challenge the decision made about your IVA in court if:
- There is evidence that one party was guilty of misconduct and did not follow standard protocol at the proposal meeting. This could include instances when you failed to provide accurate financial documents to your insolvency practitioner, and subsequently had your IVA accepted on false grounds.
- Any creditor believes that they were given an unfair outcome which went against their interests.
If you desire to challenge the decision made about your IVA application, then you’ll need to make an appeal within 28 days of your insolvency practitioner handing in their official report to the court. If those in the legal sector accept your appeal, it might:
- Terminate your IVA.
- Put your IVA on hold and set up a new meeting with all your lenders so that they can make a fresh decision about whether to accept your IVA proposal.