What do creditors require in a variation meeting?
Summary: This article explains what to expect if there is a change in financial circumstances while in an IVA, as well as what information is required by the creditors should a variation to the IVA be required.
When entering an Individual Voluntary Arrangement (IVA) the terms and conditions that the individual agrees to are legally binding. They will generally confirm that the individual agrees to repaying a set amount each month (based on what they can reasonably afford after essential expenditure) amongst other criteria.
What happens if there is a change in my financial circumstances when in an IVA?
Should there be a significant change in circumstances, such as redundancy or a drop in salary, the IVA supervisor must be notified immediately. They will then be able to assess if the original terms of the IVA are still appropriate. If it becomes apparent that the original terms of the IVA can no longer be adhered to, it does not necessarily meant the IVA will fail. By reviewing the individuals new circumstances (much in the same way as the initial IVA process), it may be possible for a revised proposal to be put before the creditors, allowing for a reduced monthly payment. The IVA supervisor will prepare this proposal and submit to the creditors in an IVA variation meeting.
What information is required for the variation meeting?
In order to prepare the report, the IVA supervisor will initially require all financial details of the debtor, as they did in the initial setup. This will include bank statements, payslips, evidence of utility bills as well as the value of any property and assets. This information will be used to calculate a new monthly repayment amount. The IVA supervisor will then be able to recalculate the total amount that will be repaid to all the creditors, which is ultimately what the creditors are interested in. This is then provided to the creditors as a report, with any supporting evidence.
Do creditors have to agree to an IVA variation?
This very much depends on if they feel the total amount they will be repaid over the course of the IVA is worthwhile. If the creditors feel that they would actually get more of the outstanding debt back if they petition for bankruptcy, then they could vote against the IVA variation. The actual voting process works in very much the same way as the initial IVA proposal in that the creditors of 75% of the value of the debt must agree to the proposal for it to be passed.
What is the timescale for an IVA variation meeting?
The IVA supervisor must give at least 21 days notice to the creditors of the IVA variation meeting, although it can sometimes be longer than this. It will also be dependent on the original terms of the IVA which may specify a minimum timescale.