Why Would Creditors Refuse an IVA?

Individuals who are suffering from overwhelming debt that they can’t afford to repay might find that an Individual Voluntary Arrangement (IVA) is a good way of repaying debt. However, if you choose to go through an IVA, there are many reasons creditors would refuse an IVA.

Today, we will be looking at why some creditors may decline your IVA proposal, what you can do to prevent this from happening and what options you have if this does end up happening. 

How does the initial IVA Proposal Work? 

The first thing you’ll do if you choose an IVA is to locate an insolvency practitioner (IP). Once you’ve found one, you and your IP will sit down to write a legal document called an IVA proposal.

Such a proposal will contain specific data, such as an income and expenditure statement, your total unsecured debts, and assets. It will also include a full payment strategy if your creditors are to accept your IVA proposal.

Once you’ve completed your IVA proposal with your insolvency practitioner, they’ll call a meeting with your creditors and present the document to them. This would be 17 days after the proposal was initially sent to them to give them enough notice to do through the proposal and decide on how to vote, whether to accept or reject the proposal.

To get your IVA approved and implemented, you’ll need the approval of at least 75% of your creditors.

It’s crucial to remember that the vote of each creditor is not valued equally; it depends on how much you owe them.

If you owe 90% of your total debt to creditor A and 10% to creditor B, for example. Then creditor A’s vote will be worth 90%. As a result, if creditor A rejects your plan but creditor B accepts it, your IVA proposal will still fail.

Why Did My Creditors Reject My IVA?

There might be a variety of reasons why your IVA was turned down, depending on your case.

Some examples are listed below: 

You Provided Incorrect or Incomplete Information 

Remember that your creditors are individuals or organizations who have been dealing with you for a while. As a result, they will have some understanding of your financial status. When proposing an IVA to them, be thorough and honest.

If a creditor learns that you’re fabricating something in your IVA proposal or presenting it as if it were something else, they will almost certainly reject it.

Your creditors may inquire about it with your IP who will be chairing the IVA meeting of creditors but they are under no obligation to do so. 

If they believe that you’re being dishonest, there’s a chance they’ll outright reject your offer. As a result, when creating your initial IVA proposal, it’s critical to be thorough and honest.

Unrealistic Budget or Payment Plan 

When you’re looking to manage your debt via an IVA, it’s critical that you be realistic about how long it’ll take you to pay off your obligations. It should be your greatest effort to resolve the unsecured debt you owe to your creditors.

As a result, the payment plan you propose to handle your debts should be in line with the income and expenditure you stated in your proposal.

You must include all of your debts as well as all of your income every month. Nothing should be forgotten, exaggerated, or underreported. For example, if you work a lot of overtime and this increases your income, include it in your proposal.

Similarly, the essential living expenditures you list in your proposal should be fair. If you share your home with a spouse, your creditors will expect reasonable family living expenses to be shared equally.

Past creditors may have had negative encounters with you.

If you’ve previously acted irresponsibly with your money and creditors are aware of it, they’ll most certainly reject your offer.

If your debt resulted from chronic addiction or irresponsible conduct such as borrowing recklessly knowing you couldn’t pay it back, drinking, or drug use, your creditors will require proof that you have changed your ways. If creditors believe that you will continue to behave irresponsibly if your IVA is accepted, they will most certainly reject it.

Your Proposal may not be Viable for a Creditor (or Creditors)

Of course, if a creditor believes that the amount they would receive from you in an IVA is insufficient, they will reject your offer. Creditors are more likely to accept your offer if they believe there’s no other way you’ll be able to repay your debt in full.

What Should I Do if My IVA gets Rejected? 

When creditors reject your offer, they may provide details as to why they decided not to accept it.

They may even suggest changes to your proposal. You have the option of accepting their modifications or making corrections to your proposal in order to make it acceptable for them.

You may accept the changes they suggest if you’re willing to accept them, and your IVA might be accepted as a result. It is better to seek debt advice from your IP before you decide to make amends to your creditors, regardless of your debt level.

Alternatively, if you’re not willing to accept the changes your creditors propose, you may choose to use some other debt solution to address your debt. One debt solution might be a lot better for you than others, depending on your financial condition.

Some examples of other debt solutions are: 

Debt Management Plan (DMP) 

A debt management plan is debt repayment plan similar to an IVA in that it’s a contract between you and your creditors in which you promise to make modest payments to them every month and pay off your debt over a set length of time.

Please be advised that a DMP is not legally binding as an IVA. You can either set up your own DMP with your creditors or hire a debt management firm (or debt charity) to do it for you. Always go for a Financial Conduct Authority-approved debt management company if possible.


You could file for bankruptcy and have your debt written off in a more rapid period. Your assets are not safeguarded when you declare bankruptcy, unlike with IVAs. They can be taken and sold off if the courts allow it.

Debt Relief Order (DRO) 

If your total debt is less than £30,000 and you have a spare monthly income of less than £75, you may choose a DRO. Because the DRO is considerably quicker than an IVA, it finishes within a year.

However, in order to be eligible for a DRO, you must have little or no assets in your name. There are several other stringent criteria that you should be aware of. For more information visit Stepchange Debt Charity.


There might be a variety of reasons why your offer may be rejected.

This is why you should get debt advice and information from your IP, as well as work with them closely while drafting your proposal. 

Get in touch for free and impartial advice on available debt solutions by leaving an enquiry and one of our team will call you back and go through things to find the best debt solution for you.

You can also call us on freephone 0800 169 1536.

If you prefer to speak to one of our team through WhatsApp, our number is 07762 145 581 or speak to someone through our Live Chat service for free debt advice.

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Customers can get free debt advice from the Money Advice Service – an organisation set up by the Government to offer free and impartial advice to those in debt. For more information from the Money Advice Service visit www.moneyadviceservice.org.uk. MAS is part of the Money & Pensions Service. We are not affiliated with MAS in any way.

Become Debt Free is a trading style of Re10 (Finance) Limited Registered Number 04651137.  Data Protection Act Registration Number – Z8613095

Become Debt Free specialise in providing and administering Individual Voluntary Arrangement (“IVA”) solutions to individuals based in England, Wales and Northern Ireland.  We do not administer Debt Management Plans, Debt Relief Orders, or any other debt solutions.  We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meets the criteria for an IVA, therefore, all advice is given in reasonable contemplation of an insolvency appointment.

* To qualify for debt write off in an IVA with us, you must have a minimum of £7,000 of qualifying unsecured debt owed to two or more creditors.  The amount of debt write off is based on your own personal circumstances – typically this could be up to 85% of what you owe; and this has been achieved by over 10% of our customers who have successfully completed their IVA’s in the last 12 months.  The amount of debt write off differs for each customer and is dependent upon their individual financial circumstances and subject to the approval of their creditors.

Andrew Bowers is authorised in the UK to act as Insolvency Practitioner by the Insolvency Practitioners Association.


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