{"id":10720,"date":"2011-08-05T12:44:28","date_gmt":"2011-08-05T11:44:28","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=10720"},"modified":"2019-08-01T15:07:05","modified_gmt":"2019-08-01T14:07:05","slug":"getting-an-iva-accepted","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/getting-an-iva-accepted\/","title":{"rendered":"Getting an IVA Accepted"},"content":{"rendered":"\n

If you are considering entering into an Individual Voluntary \nArrangement (IVA) with your creditors you will naturally want to be \nconfident that they will approve your IVA proposal. The overriding \nquestion is whether your offer will be sufficiently attractive to at \nleast 75% of those creditors who choose to exercise their right to vote \nto persuade them to accept your proposals. So what do creditors or to be\n more precise your particular creditors want to see in your proposal \ndocuments.<\/p>\n\n\n\n\n\n\n\n

The first thing that creditors look for in an IVA proposal is the \ntruth. They expect the debtor to be open, frank and honest. After all it\n is their money which is at stake and if a debtor is seeking their \nagreement to write off a large percentage (or indeed any part) of their \nliabilities via an IVA, the least they expect to see in the proposal is \nthe truth, the whole truth and nothing but the truth. So let us take \nthis as a fundamental requirement and assume that the IVA proposal is an\n honest one.<\/p>\n\n\n\n

\"Working<\/figure>\n\n\n\n

Clearly, the IVA proposal should also be the insolvent debtor\u2019s best \nattempt to address their unsecured liabilities and the estimated return \nto creditors must be reasonable. This return is usually called the \nestimated (or projected) dividend and is often expressed as the \npercentage of the debts which the insolvent debtor promises to repay. \nFor example if the debtor estimates that creditors will get back a \nquarter of the monies borrowed by the debtor then the estimated return \nis 25% or 25 pence in the pound. It is for creditors to decide whether \nthe dividend is reasonable or not. Creditors make this decision taking \ninto account the debtor\u2019s circumstances and they exercise their judgment\n as to whether the offer is the debtor\u2019s best attempt to address their \ndebts. <\/p>\n\n\n\n

Apart from the credibility of the proposal and the expectation of a \nreasonable dividend, there are a number of other criteria which \ncreditors apply. Take the case of a self employed (S\/E) person who has \nliabilities to HM Revenue & Customs (HMRC). If the debtor has a \nhistory of non-compliance then HMRC are likely to reject the proposal. \nThe most frequent such non-compliance and probably the most serious one \nis the failure to make S\/E returns to HMRC. If S\/E returns are up to \ndate, HMRC may well accept the IVA proposal even when the liabilities to\n HMRC are substantial, provided returns are up to date. The way HMRC \nlooks at this issue is that the cost of making S\/E returns is often \nminimal and even if the debtor is unable to make full tax and associated\n payments as they fall due, the failure to make returns indicates a \ndeficit of goodwill and possible future problems if the IVA were to be \naccepted. <\/p>\n\n\n\n

HMRC also puts great store in the principle of treating all unsecured\n creditors equally. They particularly dislike an IVA proposal where what\n is sometimes described as a hostage creditor seeks to be treated more \nfavorably than other creditors. For an S\/E person, a hostage creditor \nmay, for example, be a critical supplier of goods and\/or services to the\n debtor\u2019s business, who will only continue to do business with the \ndebtor if they are excluded from the debtor\u2019s IVA and if they receive \npayment in full for all debts incurred by the debtor prior to the IVA \nbeing approved. This is obviously preferential treatment for that \ncreditor who is holding the debtor hostage. From the debtor\u2019s point of \nview, it\u2019s a case of damned if I do and damned if I don\u2019t! If they \ninclude the hostage creditor\u2019s debt in the IVA, that creditor will stop \nsupplying critical goods or services and the debtor\u2019s business may fail \nas a result which in turn may cause the IVA to fail. If on the other \nhand the debtor fails to disclose the liability to the hostage creditor \nand excludes it from the IVA, fully intending to service that debt \nsecretly, than again the IVA may fail if and when the supervisor of the \nIVA or another creditor discovers the preferential treatment. In these \ncircumstances the debtor\u2019s business is also likely to fail. Such a \ndebtor could hardly be described as being open, frank and honest.<\/p>\n\n\n\n

Creditors may also reject an IVA if it is possible that in a Debt \nManagement Plan (DMP), all creditors could be paid in full in less than \nten years and in some cases in a period of one hundred months. Although \nsuch an outcome might well depend on some or all interest and penalties \nbeing frozen during the life of the DMP, that is by no means guaranteed,\n given the varying approaches that different creditors adopt towards a \nDMP. <\/p>\n\n\n\n

The relationship between the creditor and the debtor is also a \nsignificant factor in shaping the creditor\u2019s attitude to the IVA \nproposal. If the debtor is a relatively new customer and the debt was \nincurred within the last six months, it would not be surprising for the \ncreditor to reject the IVA. On the other hand if the debtor was a long \nstanding customer of say twenty years and the new debt was simply a \nconsolidation of several existing debts with that creditor, then it \nwould be less likely that that creditor would to reject the IVA, given \nthe long term knowledge of the debtor\u2019s financial history.     <\/p>\n\n\n\n

The principal other factors which may impact on the attitude of \ncreditors to an IVA proposal are the past behavior of the debtor, the \nviability of the IVA, the charging of assets and the previous (and \ncurrent) lifestyle of the debtor. Let us look at these in turn.<\/p>\n\n\n\n

Creditors expect that the debtor will be open, frank and honest in \ndisclosing all relevant matters in the IVA proposal. If a creditor is \naware of a significant matter relating to the debtor\u2019s prior financial \nhistory and relevant to the debtor\u2019s current financial difficulties and \nthe matter is not disclosed in the IVA proposal then that creditor would\n be strongly inclined to disclose the matter to the nominee, assuming \nthat the creditor\u2019s knowledge of the a matter is entirely legitimate and\n is based on prior business or personal dealings with the debtor. The \nData Protection Act would not protect the debtor from such disclosure. \nIn any case, it would not be surprising that that creditor would reject \nthe IVA proposal, even without giving any reason.<\/p>\n\n\n\n

Creditors will also exercise their judgment and discretion where the \nestimated dividend is so low that it is not financially viable for the \ncreditor to approve the IVA. Suppose for example that the debt was \u00a3500 \nand the projected dividend in a five years IVA is 20p in the \u00a3. While \nthe creditor could expect to receive a dividend of \u00a3100 over a period of\n five years, the administrative costs of providing a proof of debt and \nkeeping the account open might be excessive and not worthwhile \nfinancially. Such a creditor might reject the IVA proposal.<\/p>\n\n\n\n

A further scenario which arises is where the creditor has already \ntaken legal steps to secure the debt by obtaining a charging order \nagainst the debtor\u2019s property. Suppose that a creditor has already \nobtained an interim charging order when the debtor\u2019s IVA proposal \narrives. That creditor has two choices. The first choice is to proceed \nto obtain a final charging order and rely on that for the satisfaction \nof the debt hoping that the IVA will be rejected so that the charging \norder can be made absolute. If the creditor were to rely on the charging\n order, then that creditor would not be permitted to vote for or against\n the IVA and if the IVA were to be approved, the charging order would \nnot be granted and the creditor could claim as an unsecured creditor in \nthe IVA, receiving the same dividend as the other unsecured creditors. \nThe second choice available is for the creditor to give up their \nsecurity and submit an unsecured debt claim in the IVA and thus be \npermitted to vote for or against the proposal. If the IVA proposal were \nto be rejected, the creditor could re-apply for a charging order after \nthe meeting of creditors is concluded.<\/p>\n\n\n\n

The last scenario is where the lifestyle of the debtor leads a \ncreditor to conclude that an IVA would be likely to fail in supervision.\n Creditors may look at how debts were accrued in the first place. If the\n debtor engaged in a lavish but unsustainable life style over a period \nof time apparently not caring whether such lifestyle debts could be \nrepaid or worse, borrowed recklessly knowing that the debts could not be\n repaid in any reasonable time frame, then creditors would be inclined \nto reject such a proposal. If the debtor\u2019s lifestyle involved chronic \naddictive behavior such as excessive gambling, drinking or taking drugs \nand if the insolvency was due to such behavior, creditors would have to \nbe satisfied that such behavior had ceased and that the debtor had taken\n reliable corrective action to sustain the changed behavior, before \naccepting such an IVA.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you are considering entering into an Individual Voluntary Arrangement (IVA) with your creditors you will naturally want to be confident that they will approve your IVA proposal.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-10720","post","type-post","status-publish","format-standard","hentry","category-iva-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=10720"}],"version-history":[{"count":1,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10720\/revisions"}],"predecessor-version":[{"id":10734,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10720\/revisions\/10734"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=10720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=10720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=10720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}