The Individual Voluntary Arrangement (IVA) process involves a number of steps, one of which is a ‘creditors meeting’ or ‘meeting of creditors’.
But what exactly is a creditors meeting? And is it something that you should be worried about? The term ‘creditors meeting’ can sound daunting, but it doesn’t mean that all your creditors physically meet in person to discuss your debt.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legally binding debt solution designed to help you repay the people you owe money to (your creditors) by consolidating your unaffordable debt into a series of smaller monthly payments.
Because an IVA is a formal agreement, it must be arranged and managed by an Insolvency Practitioner (IP). They will review your income and expenses, calculate your monthly payments, and communicate with your creditors.
Most IVAs last five years but an IVA can last six years if your financial circumstances change and you need extra time to make up the money owed. This can happen if you miss payments, lower your payments, or are unable to release equity from your home.
During an IVA, all interest and charges will be frozen and your creditors will be told to stop contacting you while you make payments towards the debt. Once an IVA ends, any remaining debt will be written off and you’ll be declared debt-free.
How much debt do you have?
How does an IVA work?
The IVA process can differ slightly but most providers follow the same basic set of steps which typically takes between 21 and 28 days.
Here is a brief summary of what you can expect when you apply for an IVA:
Talk to a money adviser
The first thing you should do before you apply for an IVA is seek impartial advice from a money adviser. They will review your financial situation and discuss your options to determine whether an IVA is the right debt solution for you.
This should be your first step regardless of which debt solution you choose as it can help you know that you’re doing the right thing before making any final decisions.
Find an Insolvency Practitioner
Once you’ve been deemed a suitable candidate for an IVA, you must find an Insolvency Practitioner (IP) to help you set up and manage your arrangement. This can be done by searching the online directory but, if you apply through a debt management company, you’ll be assigned an IP.
The IP will manage your IVA and communicate with your creditors for the next five years, so you must ensure you are happy with your choice before proceeding.
Draft your IVA proposal
Before your IP drafts your proposal, it can be useful to gather all the relevant paperwork beforehand, such as payslips, bank statements, and financial policies.
They will then get to work drafting your proposal – which is essentially a document outlining your financial situation and how you plan to repay your debt – before sending it to all the creditors included in your IVA.
Gain creditor approval
Once your creditors have received your IVA proposal, they must vote on whether or not they agree to the proposed terms – this is known as a ‘creditors meeting’. For your IVA to go ahead, the creditors to which you owe 75% of your debt must sign off on the proposal.
Generally, the more you’re able to offer towards your debt, the more likely your creditors are to approve your IVA. However, it’s important to be realistic and not make an offer that’s outside of what you can reasonably afford.
Start making monthly payments
The final step in the IVA application process is making your first monthly payment. This will usually be within 30 days of your IVA being verified and will fall on the same date each month going forward.
Remember, your IVA payments will be based on your income and expenses to ensure they remain affordable for the duration of your arrangement. Talk to your IP as soon as possible if your circumstances change and you can no longer afford your repayments.
“No fuss, just simple, honest advice. Communication is good and they make the process as easy as they can.”
What is a IVA creditors meeting?
Before your IVA can be activated, it must go through a round of voting from your creditors – this is known as a ‘creditors meeting’ or ‘meeting of creditors’.
However, the term ‘creditors meeting’ can be misleading as there is no physical meeting involved and it is simply the name given to the process of your creditors submitting their vote on your IVA, which is usually done by mail or post.
Remember, for your IVA to go ahead, the creditors to which you owe 75% of your debt must agree to the terms outlined in your IVA proposal. Each creditor has a vote equal to the percentage of the debt they are owed (e.g. if your total debt is £20,000 and you owe a certain creditor £2,000, their vote will make up 10% of the available votes).
The date of your creditors meeting is often just a deadline for your creditors to cast their votes. This can differ slightly and can be extended in certain circumstances but you’ll always be informed of the date of the creditors meeting as soon as it’s been set.
How long does a IVA creditors meeting last?
The voting process begins as soon as all your creditors have received a copy of your IVA proposal and typically lasts around 28 days. This means that, within 28 days of your creditors receiving your IVA proposal, you should receive a decision on whether or not your IVA will go ahead.
Some creditors prefer to cast their votes as soon as possible while others wait until days before the deadline. The deadline can also be adjourned by a maximum of 14 days from the original date if your creditors need more time to make a decision.
Once your IP has received a decision from all of your voting creditors, they will review the votes and inform you of the outcome.
When does the creditors meeting happen?
The creditors meeting isn’t a physical meeting that happens on a specific date but the name given to the process of your creditors casting their votes on your IVA. This process starts as soon as your creditors receive your IVA proposal and ends on the deadline given (typically 28 days later).
Throughout the voting process, you’ll be kept informed of any major updates that may impact your IVA (e.g. if the date of your creditors meeting has to be extended or if most of your creditors have rejected your proposal and it’s likely to fail).
On the day of your creditors meeting, some of your creditors may choose to attend a virtual meeting to further discuss the terms of your IVA but this isn’t necessary and most creditors will have already submitted their votes by this time.
Do I have to attend my creditors meeting?
The only thing that you need to do on the date of your creditors meeting is be available to talk about the outcome of your IVA.
Even your creditors don’t need to attend a virtual meeting if they don’t want to as long they cast their vote by email or post before the deadline.
The outcome of your creditors meeting will usually be relayed to you in a brief phone call. This phone call will reiterate the terms of your IVA, including the monthly payments you agreed to, and discuss any changes (known as ‘modifications’) that your creditors requested.
What modifications can my creditors request?
Sometimes, a creditor will be happy with your IVA proposal apart from some minor details, such as the amount being offered or the length of the payment schedule. When this is the case, they may make a deal with you to accept the terms of your IVA as long as you agree to certain changes.
The most common modifications are asking for your monthly payment amount to be increased, for you to find cheaper car insurance, or for your IVA term to be extended. Once you agree to the modifications, the IVA can be approved.
Furthermore, if a creditor requests a modification early in the voting process (e.g. before the creditors meeting), you’ll usually be informed as soon as possible to give you a chance to decide whether or not you want to proceed.
Debt help tailored to you
From writing off a large portion of your debt, to readjusting your budget, we’ll find a solution that suits you.
Why has my IVA been rejected?
Because your IVA proposal will be drafted by an IP with experience in handling IVAs and dealing with creditors, they usually have a good idea of what is – and isn’t – likely to be accepted.
However, there is always a chance that your IVA will be rejected. We’ve outlined some of the most common reasons why your IVA might be rejected below:
Your creditors suspect you are being dishonest
The key to getting your creditors to approve your IVA proposal is to be as honest and informative as possible.
Remember, your creditors are likely to have been dealing with you and your debts for a while so they should be able to recognise if you’re being dishonest.
Even if a creditor is the slightest bit suspicious that you might be lying or omitting key information in your proposal, they will almost certainly reject your IVA. They may reach out to your IP to confirm some details about your financial history before doing so but, in most cases, they will just vote against your IVA.
Remember, as long as the creditors to which you owe 75% of your debt approve of your IVA, it will go ahead regardless and all of your creditors will be bound to the terms of the arrangement.
Your payment plan is unrealistic
While it can be tempting to suggest a high monthly amount in an attempt to get most of your creditors to agree, they will usually reject it if they think there’s even the smallest chance that you won’t be able to afford it.
Therefore, it’s important to strike the right balance between offering as much as you possibly can towards your debt while still being practical and realistic.
Most IPs won’t let you submit a payment plan that seems unrealistic or includes information that has been omitted or exaggerated as they know this is likely to lead to a rejection.
A creditor has had a negative experience with you in the past
Some creditors will outright reject your IVA proposal if you have owed them money in the past and you acted irresponsibly or failed to stick to the terms of the proposal.
For example, if your past debt happened due to making reckless financial decisions, such as gambling, your creditors may ask for proof that you have changed your ways and that risk is no longer there.
Conclusion
An IVA requires the approval of the majority of your creditors before it can go ahead. This happens during a process known as a creditors meeting or meeting of creditors.
The date of your creditors meeting, however, is simply the deadline by which your creditors must return their votes and doesn’t mean a physical meeting takes place.
Remember, while an IVA can help you write off a portion of your debt and stop all creditor contact, other debt solutions are available.
