What if my IVA proposal is rejected by my creditors or Insolvency Practitioner?
Your creditors decide which option will get them more money: an IVA or bankruptcy. The IVA should make a reasonable offer to your creditors, as those IVAs that do not, may get rejected. If this happens, you may re-submit the proposal with some amendments – ones that will benefit the creditors.
Should your IVA negotiations fail at the outset, there are a few things you can do. Your other options may be a debt management plan, an informal arrangement or bankruptcy. This last option, bankruptcy, is one that should only be applied as a last resort.
Why do IVAs fail?
There are three common reasons why IVAs fail:
- Regular payments have not been made towards the IVA.
- The person has failed to supply information.
- The person has failed to comply with the general terms of the IVA .
Failure of IVA during the 5 year term
Speak to your IVA Supervisor if you find it difficult to make regular payments to the IVA.
Your financial situation could be re-assessed and a new, more suitable proposal could be presented at a second Creditors’ Meeting, which your creditors may agree to. This does, however, depend on what clauses the original IVA contains. Some creditors might insist on making you bankrupt when an IVA fails, and will stipulate this in the IVA. If you can convince the creditors that you will manage your finances better this time, they may consider a second IVA term. Failing this, they could want you to enter into a debt management plan or personal bankruptcy.
If you fail to make (regular) IVA payments you will be in breach of the contract and might receive a Notice of Breach from the IVA Supervisor. This gives you one month to rectify the situation, after which it is possible that a Certificate of Termination will be sent to you. Bankruptcy proceedings could start against you after this. Since you will no longer be protected by the IVA, your creditors may demand that you pay your debts immediately – in full.