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IVA: What happens at the creditors meeting?

28 March 2008

Before an IVA (Individual Voluntary Arrangement) can ‘start’, it must be accepted at a creditors meeting. A brief explanation:

Before the meeting
Once the Insolvency Practitioner (IP) has drawn up the IVA proposal and the individual is happy with it, the IP will get in touch with the creditors to tell them when the meeting will take place. They must be given at least 17 days’ notice.

The IP will send them a copy of the proposal, along with details of the individual’s income and expenditure, so they can see for themselves whether the proposal is a realistic reflection of what they can afford to pay.

At the meeting
In practice, few creditors actually attend a creditors meeting; it is more common to conduct a ‘paper meeting’ where votes are made by e-mail or fax, stating whether they accept the proposal, reject it, or request changes to it. Similarly, there’s no need for the individual to attend the meeting in person. However, they must be contactable by telephone, in case any creditors request changes to the proposal.

The IP, the individual or one of the creditors can ask for the meeting to be adjourned for up to 14 days, if they need time to collect votes or consider any changes requested to the proposal.

Accepted or rejected?
For the IVA to go ahead, it must be accepted by creditors who are owed at least 75% of the total debt between them.

An example. The individual owes a total of £40,000 to the following five creditors:

Creditor A	£5,000
Creditor B	£20,000
Creditor C	£2,000
Creditor D	£10,000
Creditor E	£3,000
Total	£40,000

Creditor B ‘owns’ half of the debt, so

• if Creditor B (50%) accepts the proposal, it would still need to be accepted either:
  1. by Creditor D (25%) or
  2. by Creditors A, C and E (12.5% + 5% + 7.5% = 25%).

• if Creditor B rejects the proposal, there’s no way it can be accepted – the votes of the other four only add up to 50% between them.

Like to know more? Click here for a 60-second guide to IVAs.

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