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What if my creditors don’t agree to my IVA proposal?

iva rejected

If you apply for an Individual Voluntary Arrangement (IVA), you will be assigned an Insolvency Practitioner (IP) from the respective IVA administrator. The IP will then draft an IVA proposal on your behalf, considering your financial circumstances, the property you own (if any), your creditors, etc. The IP will work out a monthly IVA repayment amount that you can easily afford out of your disposable income. The IVA proposal is then presented to the creditors for their agreement. 

Here comes the matter of our discussion today. After the IP informed the creditors of the IVA terms and repayment mode, what if the creditors don’t agree to IVA proposal? And if the creditors disagree with the IVA proposal is rejected, why would they do so? 

Why Creditors May Reject an IVA Application ?

First off, all your creditors may not have the same perception and regard for your debt solution. While some agree with your IVA proposal, some may not. Those disagreeing creditors could also attempt to pull other creditors from accepting the proposal of IVA. But in the majority of the IVA cases, the creditors are decent enough to put forward their reasonings and their satisfactory terms and conditions if the IVA is amenable. To get the IVA accepted, you only agree with the creditors’ requirements. If you do not agree to the creditors’ terms, your proposal of IVA will deem rejected. If your proposal of IVA is accepted by no less than 75% of the majority creditors, your proposal of IVA deems approved. 

iva proposal

Regardless, if creditors don’t agree to IVA proposal, it is the responsibility of the Insolvency Practitioner (IP) to talk it out with them. Suppose the IP presents that the proposal of IVA is amenable to adjustments and modifications to its terms and conditions. In that case, the creditors’ meeting can be put on hold until a new IVA proposal satisfying the creditors is drafted. But if the IP believes that the proposal of IVA is not salvageable to a good point, you will have to compromise with other available debt options. 

If you seek debt advice from the responsible authority, they might suggest various insolvency debt options to write off your debts. Possible debt solutions other than the Individual Voluntary Arrangement (IVA) are bankruptcy, Debt Relief Order (DRO), Debt Management Plan (DMP), etc. If the creditors don’t agree to proposal of IVA, you only have limited options to clear your debts. 

But why would the creditors choose not to agree with the proposal of IVA? There could be various reasons for their disagreement with the proposal of IVA if they haven’t specified it to the IP. 

Possible reasons for the creditors’ disagreement with your IVA proposal

Reason 1: Your IVA proposal is not viable for the creditor/creditors

Suppose the monthly repayment amount is meager, considering your total debt amount. In that case, some of the creditors or all the creditors may feel that your IVA offer is not financially viable for them. The additional administrative costs of the IVA setup and its management are not worth contributing to the creditors. If the creditors have different perceptions, they will reject your proposal of IVA. 

The creditors might be willing to accept the IVA proposal if they believe that you cannot realistically pay off the debt amount in total for a long time. And, accepting the proposal of IVA is the only way to recover the debt amount. Therefore, while the IP is working out the monthly IVA repayment amount, you must provide all your financial information accurately, providing that it will convince the creditors to accept the IVA proposal. 

Reason 2: Incomplete or inadequate financial information 

When you apply for an IVA, you have to provide every aspect of your financial history. Your debts, creditors, income & expenditures, assets and properties, and third-party gains (if any) will be accounted for to determine a feasible and affordable monthly IVA contributions amount. That’s why you mustn’t hide or provide incomplete financial records to the IVA Supervisor. Your IP would want you to be genuine for a reliable IVA agreement. 

Likewise, the creditors also expect accurate information about their debtor, so accepting the proposal of IVA seems worthwhile. You should disclose all the necessary facts correctly so that the creditors feel the need to buy your IVA proposal. If they notice that your estimates are dubious and different from your circumstances, creditors will reject your IVA proposal. Providing inadequate financial information in the proposal of IVA will prove you fraud and dishonesty. So, if the creditors don’t agree to IVA proposal without giving any reasonings, recheck your IVA proposal. 

Reason 3: HM Revenue and Customs (HMRC) Compliance

Suppose you have a non-compliance history with the HMRC in dealing with your returns. In that case, the HMRC will directly reject your IVA proposal. If you are a working person with a significant income source or are self-employed, HMRC and the creditors will seemingly accept your proposal of IVA. 

Another reason why creditors don’t agree to IVA proposal is discriminatory treatment. As a debtor, you can add all your unsecured debts to your IVA. But, your obligations to all your creditors vary. So, you are likely to think that you need to repay more to the creditor to whom you owe more money. Such favoritism in an proposal of IVA is sometimes denoted as hostage creditor. You might also not include significant creditors of importance in an IVA. This situation is very unfavorable for the other creditors. So, they could reject your proposal of IVA. 

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Reason 4: Impractical payment plan for the creditors.

While you draft the IVA proposal along with the Insolvency Practitioner, you should make it so that it is still affordable for you in your rational state. When creditors get your proposal of IVA, it should depict a reasonable and credible payment plan. Your financial and personal situations should reflect the impact of your finances and debts. Your creditors very well know the person as you are. So, if you propose an unrealistic payment plan to the creditors, they would see that you are bluffing. Since they know you cannot make the determined IVA repayments regularly, the creditors will reject your IVA proposal. 

To conclude, you should draft an IVA proposal that favors both parties to prevent proposal of IVA rejection. You can also seek IVA advice on how not to get your IVA proposal rejected by the creditors. 

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