Do you need breathing space from your debts?
Find out which debt solution is right for youGet started
Answer a few simple questions
See if you are suitable
Understand your next steps
Learn what an IVA proposal is, how it’s put together and what it means for your IVA.
In order to start an Individual Voluntary Arrangement (IVA), you need to come to a new agreement with your creditors about how you’re going to pay some of the money back that you owe. That’s where the IVA proposal comes in. Your Insolvency Practitioner will propose a new payment agreement and send this to your creditors. The proposal will show details such as your name, address, occupation, who you owe money to and how much you owe. It will also explain your circumstances, any expected changes over the term of the IVA and how your debts have built up.
In this blog, we’re going to look at how the IVA proposal is put together and what happens if your creditors agree or reject the proposal.
How does the proposal come together?
Your solution provider will put your proposal together for you, based on what you tell them. You will need to provide them with lots of information about your financial situation, including how much you earn, how much you spend each month, if you receive any benefits and whether you have any dependants living with you.
Once your provider has all this key info, they will work out your disposable income. This is a very important figure because it shows exactly how much you can realistically afford to put towards your debts each month. IVAs are designed to be affordable, so you won’t be expected to put more than your disposable income towards your debts each month. If you were to pay more than this, you’d be at risk of not being able to afford other important expenses in your life, such as food or utility bills.
The IVA proposal will outline your budget and how much you are able to put towards your debts. This way, when your creditors look through it, they can see the reasoning behind what you’re offering to pay. It’s possible that you will be asked to justify some of your expenditure by your Insolvency Practitioner, but this is so they can explain why it is reasonable when they put your proposal to your creditors.
Before the proposal is sent out to your creditors, you will have a chance to look over it and make sure that all the information is correct.
What happens if my creditors accept the proposal?
It’s important to mention that your solution provider will work hard to put together a proposal that your creditors will find acceptable. If your creditors do accept the proposal, then your IVA can go ahead.
Your provider will organise something called a Creditor Meeting, and it’s during this meeting that your creditors get a chance to vote either for or against the IVA. Before the meeting, creditors are given a 17 day notice period, so they can review the proposal and think about their decision. You don’t have to attend the creditor meeting yourself, however you will need to be available on the phone while it’s taking place – they are usually held as conference calls - as the IVA needs to be accepted by both your creditors and you and cannot go ahead without your agreement at the meeting.
A certain proportion of your creditors have to agree in order for your IVA to go ahead. On the day if 75% of the creditors that vote say yes, by value of their debt, then the IVA can go ahead. During the meeting, a creditor may ask for changes to be made to the proposal, known as modifications. If they do this and you accept the change, this counts as a yes vote for the IVA.
If you’re not sure about accepting a change, or one of your creditors wants more time to think about the proposal, the meeting can be adjourned for up to 14 days.
Once the IVA is agreed, it is legally binding for both you and your creditors. Your creditors have to stick to the terms of the agreement, like not pursuing further legal action against you, even if they voted against it, as long as enough of the other creditors voted yes.
What happens if my proposal is rejected?
A we said, your provider will work hard to make sure they put together a proposal that has a good chance of being accepted by the majority of your creditors. However, in some cases the proposal can be rejected.
If this happens, your provider may need to go back to the drawing board and see whether they can put together a new proposal. Or you might need to consider another debt solution instead. If this is the case, your debt advisor can help you through the process of making sure you start a solution that is appropriate for your needs.
Is it possible for the terms of the IVA to change while it’s ongoing?
Now you know how a proposal is put together, you might be wondering whether it’s possible to change the terms of the IVA once it’s already started. It is sometimes possible to vary your payments during your IVA. If your circumstances change meaning you can’t afford your payments anymore, you should speak to your solution provider and they will look into it for you.
If the change in payment is less than 15%, it can go ahead without the permission of your creditors, although you will still need the agreement of your Insolvency Practitioner and to provide evidence of why the change is needed. If it’s more than 15%, you will need your creditors’ permission. A Variation Meeting will be arranged so that they can vote on the change. Again, you’ll need creditors representing 75% of the value of your debt to agree before your payments can change.
If you’re looking for more information on this solution, our complete guide to IVAs will help you. You can also speak to someone today about your options for dealing with debt. Just scroll down the page to contact one of our expert debt advisors.
by Christine WalshBack to blog home