Will my creditors agree to my IVA?
An IVA is a voluntary arrangement.
As a result, and before an IVA can begin, your creditors must be given an opportunity to vote as to whether they agree to the proposed IVA or not.
The majority of your creditors must voluntarily accept your proposal before it can become legally binding on them all, so ensuring your creditors will be prepared to accept your IVA is paramount if your application is going to be successful.
The voting takes place during what's known as the creditors meeting.
This is a virtual meeting, rather than a face to face gathering and it's chaired, usually, by your Insolvency Practitioner or one of their representatives.
When the creditors have submitted their votes, a count is taken to establish whether sufficient creditors have voted to accept the proposal.
The proposal must be accepted by at least 75% of your creditors, in debt value terms, before the IVA can be deemed to have been accepted and, therefore, become legally binding on all of your creditors.
Any creditors who fail to cast a vote will have their vote cast for them. they will have been deemed to have voted along with the majority of those that voted.
Once the IVA has been agreed, it becomes legally binding on all creditors, even on those who may have initially rejected your proposal.
So, as you can now appreciate, getting your creditors to agree to your proposal is vital for your IVA application to be a success.
So why would a creditor agree to an IVA?
Creditors understand that a small proportion of their clients will fall on difficult times and, perhaps, be unable to maintain their financial commitments.
They make allowances for such occurrences in their business models, which allow them, when necessary, to write-off substantial levels of bad debt.
They consider this element of their business to be part of the whole and, whilst they try to avoid suffering losses as best they can, they understand from time to time it's going to happen.
When confronted with an IVA proposal, creditors are given a clear breakdown of the comparative returns they could expect from both the proposed IVA and the potential return from the same applicant's bankruptcy.
And, whilst not always the case, the IVA will usually show a significant financial advantage to the creditor by demonstrating a greater financial return over a longer period when compared to the bankruptcy alternative.
It's for this reason that creditors will agree to an IVA.
Quite simply, they will see a financial benefit to their shareholder and the company’s bottom line in accepting the IVA because, for them, it makes perfect business sense.
Are all creditors the same?
No, some creditors will be more receptive than others.
And it's true that, occasionally, a creditor will take a dim view of a particular IVA and will, occasionally, try to block it from becoming accepted.
But, for the huge majority of creditors, this is not the case.
They notify us of their preferred terms, or criteria, and are usually happy to consider IVA proposals that meet their requirements.
So, if you are considering entering into an IVA, it’s wise to discuss your circumstances with one of the IVA.org team as soon as possible.
You can call an adviser now on 0800 856 8569.
It may be that you have a creditor who is known to be less accepting of IVAs, where receiving advice at the earliest opportunity would be essential to your chances of ensuring a successful outcome.