IVA Debt Solution - What will happen at the creditors’ meeting?

Many IVA Debt Solution applicants are worried about the prospect of facing a creditors’ meeting, fearing their financial affairs will be scrutinised in front of them by possibly irate creditor representatives and asked to justify every detail of their expenditure. Twenty years ago when the IVA Debt Solution regime was set up, the whole concept was new to creditors and few IVA Debt Solutions were being put forward, so this did occasionally happen.

In the last few years IVA Debt Solutions have become a much more popular way to resolve debt problems. Creditors have therefore streamlined the whole IVA Debt Solution response process, and consumer debt cases in particular, no longer consider it necessary to attend in person.

While this does mean that debtors are unlikely to face a creditors’ interrogation, they shouldn’t think that they have got off lightly. Consumer lenders have seen thousands of IVA Debt Solution proposals, and they know how much people need to live on, particularly when it comes to larger items of expenditure like the monthly food bill. They will certainly expect the IP to have verified the debtor’s earnings and his expenditure on things like mortgage or rent, Council tax and utility bills and to report that he has done so.

When a creditor receives an IVA Debt Solution proposal, they will log receipt of the proposal, then pass the papers to a specialist IVA Debt Solution response department, usually within a large national firm of accountants to vote on their behalf. The accountants will collate claims from their various creditor clients together to submit their votes en bloc usually on the day before the meeting. The voting instructions together with claim documentation will be faxed to the Insolvency Practitioner (“IP”) arranging the IVA Debt Solution to arrive before the meeting time. Creditors vote according to the size of their unsecured debts. For an IVA Debt Solution proposal to be approved, a 75% majority by value of voting creditors needs to be achieved. At least one creditor must vote in favour, and the majority is calculated only from actual votes cast at or before the meeting time. Creditors who haven’t voted by that time are deemed to have abstained, although they could still vote at any adjournment of the meeting.

If creditors do vote, they can either accept the proposal as it stands, reject it outright, or accept it subject to modifications which will typically require an increase in the payment rate or minimum level of dividend to be achieved over the term of the IVA Debt Solution.

At the meeting, or by telephone if the debtor is not present, the IP will explain to the debtor the consequences of any modifications that have been put forward by the creditors. The debtor can either accept the modifications, reject them, or put forward a compromise offer. If a modification is not accepted, this will count as a rejection vote from that particular creditor. The debtor does not need to accept all the modifications. Even when rejecting one or more creditors’ votes, the 75% majority can still be achieved. If a compromise offer is put forward, then the meeting will be adjourned while the IP writes back to the creditors with the compromise offer. Creditors can choose to vote again at the adjourned meeting with possibly further modifications, or their original votes will stand. The meeting can be adjourned for a maximum of 14 days from the original date, by then the debtor must have accepted sufficient creditors’ votes, including those with modifications, to achieve the 75% majority to enable the IVA Debt Solution to go ahead.