Creditors in an IVA

Part of the process of setting up an Individual Voluntary Agreement (IVA) is for an individual, through their Insolvency Practitioner (IP), to approach their creditors to offer a repayment schedule. These repayments will be based on what the individual can reasonably afford and by the end of the IVA agreement (usually up to 5 years) any outstanding debt is wiped clean.

Qualifying debt

In order to qualify for an IVA, the individual must usually have debts with 2 or more creditors (eg bank, credit card company or loan provider) and with at least 3 lines of credit (eg overdraft, credit card etc). The debt itself also needs to be unsecured such as:

• Overdraft
• Bank Loans
• Credit Cards
• Store Credit
• Outstanding debt to utility companies from previous property (NOT current bills)

Debt that cannot be included would be:

• Secured debt (ie mortgage or loans secured on a property
• Current utility debt
• Student loans
• Criminal Court fines

Approval of IVA

The individual need not be present at the Creditors Meeting (although they do need to ensure they are available to be contacted) and it would be chaired by the insolvency practitioner. The meeting itself is often held virtually and the votes of the creditors are submitted by email or fax. In order for the IVA proposal to be accepted, creditors of at least 75% of the value of the debt must be in agreement. The Creditors Meeting can often be adjourned for up to 14 days for consideration of the proposal and any amendments.

IVA Rejection

IVAs have been around since 1986, and since that time, they have been becoming more popular with people with financial difficulties. As a result, Creditors for a time became more reluctant to enter into such agreements as they wanted to minimise their losses. As mentioned, an IVA proposal will only be accepted where creditors of at least 75% of the value of the debt vote in favour. Creditors with a lower percentage of the total amount owed hold a weaker vote (for example, a creditor with 24% of the value of the amount owed will be forced to accept an IVA should all other creditors vote in agreement). Block voting is where 2 or more creditors holding lower percentages of the amount owed join forces in a bid to block the IVA with their votes. More recently creditors are accepting of IVAs providing that they feel the individual is paying as much as they can afford over the term of the IVA

Should the IVA be rejected, then the debtor will need to explore other options, such as Debt Management Plans or Bankruptcy.