The Individual Voluntary Arrangement (IVA) process involves several 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 necessarily 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 your unsecured creditors by consolidating your unaffordable debt into a series of smaller monthly payments.
An IVA can also be used by an insolvent company struggling with debt – known as a Company Voluntary Arrangement or CVA.
Because an IVA is a formal agreement, it can only be 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 they 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. Here is a brief summary of what you can expect when you apply for an IVA:
Talk to a money advisor
The first thing you should do before you apply for an IVA is seek impartial advice from a professional money adviser. They will review your financial situation and discuss all available options to determine if an IVA is the right debt solution for you.
Find an Insolvency Practitioner
Once you’ve been deemed a suitable candidate for an IVA, you must find an Insolvency Practitioner to help you set up and manage your arrangement. The appointed Insolvency Practitioner (IP) will communicate with your creditors going forward.
Draft your IVA proposal
Before your IP drafts your proposal, it can be useful to gather all the relevant paperwork, 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 the debt.
Gain creditor approval
Once your creditors have received your IVA proposal, they will vote on the proposed terms in 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.
What is a creditors meeting?
Before your IVA can be officially activated, it must be approved by your creditors.
The term ‘creditors meeting’ can be misleading as there is no physical meeting involved. It is simply the name given to the process of your creditors voting on your IVA. This is usually done by mail or post.
The only time a face-to-face meeting will happen is if the majority of your creditors request it.
This process is also used during a creditors voluntary liquidation or compulsory liquidation where a company’s creditors (liquidation committee or creditors committee) meets to discuss the liquidation process.
Remember, for your IVA to go ahead, 75% of your voting creditors 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).
It’s not a legal requirement to attend meetings of creditors, but you might be contacted later the same day to discuss the outcome.
“No fuss, just simple, honest advice. Communication is good and they make the process as easy as they can.”
How long does an 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 for 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 extended 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 the majority of your creditors, they will review the votes and inform you of the outcome.
Why has my IVA been rejected?
IPs usually have a good idea of what is – and isn’t – likely to be accepted in an IVA proposal.
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
If a creditor is suspicious that you might be lying or omitting key information in your proposal, they will almost certainly reject your IVA. Remember, as long as 75% of the creditors present approve of your IVA, it will go ahead – even if as much as 25% of your creditors vote against it.
Your payment plan is unrealistic
While it can be tempting to suggest more than you can afford, 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 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.
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.
Conclusion
An IVA requires the approval of the majority of your creditors before it can go ahead. This happens during a final meeting 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, it can’t include secured creditors and other debt solutions are available.
