Many IVA applicants are worried about their first creditors' meeting. The main fear that their financial affairs will be scrutinised by a small number of 'unhappy' creditors and asked to justify every detail of their personal expenditure. Twenty years ago when IVA's first started, the whole concept was very new to creditors and few IVAs were being put forward, so this did happen.



However, more recently, in the last few years, IVAs have become a more popular way to clear debt problems. Creditors have streamlined the whole IVA process, and consumer debt cases in particular, no longer consider it necessary for the debtor to attend in person.

While this does mean that debtors are unlikely to face a creditors' interrogation, they shouldn't think they have got off lightly. Mainstream consumer lenders have seen thousands of IVA proposals, and they know how much people need to live on, particularly when it comes to expenditures such as the monthly food bill. They will certainly expect the Insolvency Practitioner to have verified the debtor's earnings and his expenditure on essentials such as mortgage or rent, Council tax and utility bills and to let them know he has done so.

When a creditor receives an IVA proposal, they will record the receipt of the proposal, then pass the papers to a specialist IVA department, which is usually within a large national firm of accountants, who vote on their behalf. The accountants then collate claims from their various creditor clients to submit their votes en mass usually on the day before the meeting. The voting instructions together along with claim documentation will be faxed to the Insolvency Practitioner, arranging the IVA to arrive prior to the meeting. Creditors can then vote according to the size of their unsecured debts. For an IVA proposal to be approved, a 75% majority of voting creditors must be achieved. One creditor, at least, must vote in favour, and the majority is calculated only from actual votes cast at or before the meeting time. Creditors who have not 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 is, reject it outright, or accept it subject to some modifications which will typically require an increase in the payment rate or minimum level of dividend to be achieved over the full term of the IVA.

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 to go ahead.

Conclusion

Although having to go through an IVA as a means to debt relief the process is now planned to try and make it as 'painless' for all concerned. So, try not to stress about the Creditors meeting. Afterall the outcome of this will only help you in sorting out your debts once and for all so there is no need to worry.