If my creditors don't agree to the IVA proposal, will I have to go bankrupt?

Summary: This article explains what may happen if an IVA proposal is refused at the initial creditors meeting.

In order for creditors to agree to an Individual Voluntary Arrangement (IVA), they will want to be certain that the amount of money they will get back will be more than if the individual is declared bankrupt, or from any other options. For an IVA to be approved, creditors of at least 75% of the total value of the debt must agree.

What can I do if my creditors do not agree to my IVA?

When applying for an IVA, it is usually a requirement to involve the services of an Insolvency Practitioner (IP) to assist with putting together the proposal, and liaising with the creditors. At the initial creditors meeting, if the creditors are not in agreement with the terms, the IP can, and usually will, adjourn the meeting for up to 2 weeks in order to apply modifications to the IVA proposal to make it more agreeable. It could be an increase to the monthly repayments, or the creditors may insist on equity being released from a property. Whatever the reason for not agreeing, feedback is given to the IP so they can make amends accordingly.

My creditors are taking me to court, I can't wait another 2 weeks for the proposal to be modified.

In some circumstances, where an individual is being harassed and threatened with court action, it is possible for the IP to apply to the courts for an Interim Order. This effectively bars the creditors taking any further action for a set period of time allowing the proposal to be put together, submitted and modified if necessary.

My IVA proposal has been refused even after modification, what next?

If the creditors still don't feel the proposal is adequate, then the individual is effectively back to square one. At this stage the IP should be able to provide advice on other options available, but it is likely that if an IVA appeared to be the best course of action, and that was not agreed to, bankruptcy may be the only viable option remaining.