Creditors' Meeting & Decision Procedure - How IVA Approval Works

Creditors' Meeting & Decision Procedure

The creditors' meeting (now typically called the "decision procedure") is where your creditors vote on whether to approve your IVA proposal. This is the pivotal moment that determines if your IVA will proceed. Understanding this process helps manage expectations and prepare for the outcome.

What is the Decision Procedure?

Modern Process (Since 2016)

Insolvency Rules 2016 changed how creditors vote:

Old system (pre-2016):

  • Physical or virtual meeting
  • Creditors attend in person/by phone
  • Vote taken at specific time
  • Meeting chaired by nominee

Current system (post-2016):

  • Decision procedure (usually virtual)
  • No physical meeting required
  • Creditors vote by deadline
  • Results announced after deadline
  • More efficient and cost-effective

Your IP can still hold physical meeting if appropriate, but most use decision procedure.

Timeline

Typical schedule:

Day 0: Proposal sent to creditors

  • Full proposal document
  • Statement of Affairs
  • Voting forms
  • Notice of decision date

Days 1-14: Consideration period

  • Creditors review proposal
  • Ask questions
  • Consider their position
  • Complete voting forms

Day 14: Decision deadline

  • All votes must be received by specified time (usually 12pm)
  • Late votes not counted
  • IP counts votes

Day 14 (afternoon): Result announced

  • IP announces outcome
  • All parties notified
  • IVA proceeds or fails

Week 3-4: Confirmation

  • Completion certificates sent
  • IVA formally begins (if approved)
  • First payment due

The 75% Approval Threshold

How Voting Works

Key principle: One pound = one vote

Not one creditor = one vote, but debt value = votes

Example:

Creditor A: Owed £20,000 (48% of total debt)
Creditor B: Owed £15,000 (36% of total debt)
Creditor C: Owed £7,000 (16% of total debt)
Total debt: £42,000

If they vote:

Creditor A: VOTES YES (£20,000 = 48%)
Creditor B: VOTES YES (£15,000 = 36%)
Creditor C: VOTES NO (£7,000 = 16%)

Total YES votes: £35,000 / £42,000 = 83.3%

Result: APPROVED ✅ (over 75% threshold)

Minimum Threshold: 75%

For approval, need:

  • 75% or more of debt value voting YES
  • Of those creditors who actually vote
  • Non-voters essentially abstain

Examples of approval:

Scenario 1: High approval

Total debt: £30,000
Votes received: £28,000
YES votes: £25,000
Percentage: 89.3% - APPROVED ✅

Scenario 2: Just approved

Total debt: £30,000
Votes received: £24,000
YES votes: £18,000
Percentage: 75% exactly - APPROVED ✅

Scenario 3: Failed

Total debt: £30,000
Votes received: £25,000
YES votes: £17,000
Percentage: 68% - REJECTED ❌

Non-Voting Creditors

If creditor doesn't vote:

  • Not counted as YES or NO
  • Effectively neutral
  • Reduces total votes considered

Example:

Total debt: £40,000

Creditor A: £20,000 - VOTES YES
Creditor B: £15,000 - VOTES YES
Creditor C: £5,000 - NO VOTE

Total votes received: £35,000
YES votes: £35,000
Percentage: 100% of votes cast

Result: APPROVED ✅

This helps you: Non-voters don't hurt approval chances

What Creditors Consider

1. Return vs Bankruptcy

Most important factor

They compare:

IVA Proposal: 60p per pound
Bankruptcy alternative: 5p per pound

Decision: APPROVE IVA (55p more per pound)

If IVA offers significantly better return: Very likely approval

If IVA similar to bankruptcy: May reject or request modifications

2. Affordability and Sustainability

Creditors assess:

  • Is income sufficient?
  • Are expenses reasonable?
  • Can debtor sustain payments for 5-6 years?
  • Is employment stable?

Red flags:

  • Income barely covers expenses
  • Unrealistic budget
  • Unstable employment
  • History of failed payment plans

Green flags:

  • Clear disposable income
  • Stable employment
  • Realistic expenses
  • Good payment history before crisis

3. Cause of Debt

Acceptable reasons:

  • ✅ Relationship breakdown
  • ✅ Illness/injury
  • ✅ Job loss/redundancy
  • ✅ Business failure
  • ✅ Income reduction
  • ✅ Unexpected crisis
  • ✅ Honest poor management

Problematic reasons:

  • ❌ Gambling addiction (without treatment)
  • ❌ Fraud
  • ❌ Recent reckless spending
  • ❌ Credit taken knowing couldn't repay

4. Asset Realization

Creditors want to know:

  • Are all assets declared?
  • Will they be used appropriately?
  • Is equity release proposal reasonable?

Property equity:

  • Must be addressed in year 5
  • Remortgage attempts required
  • Extension alternative if can't release

Vehicle values:

  • Should be reasonable for circumstances
  • Luxury cars may need downsizing
  • Essential for work = protected

5. Recent Credit Use

Timeline matters:

Credit 12+ months before IVA:

  • ✅ Generally fine
  • Normal credit use
  • No concerns

Credit 6-12 months before:

  • ⚠️ May raise questions
  • Depends on circumstances
  • Should be explainable

Credit 0-6 months before:

  • ❌ Very problematic
  • Appears fraudulent
  • Likely objections

Credit after financial difficulties began:

  • Worst case scenario
  • May exclude from IVA
  • Possible criminal fraud

6. Previous Debt Solutions

If you've tried other solutions:

  • ✅ Shows good faith
  • ✅ Demonstrates effort
  • ✅ IVA is last resort

Previous attempts:

  • Informal arrangements
  • Debt Management Plan
  • Payment holidays
  • Negotiated reductions

Creditors view positively: Tried alternatives first

7. Honesty and Transparency

Proposal should:

  • Include all creditors
  • Declare all assets
  • Show all income
  • Explain situation fully

Omissions or lies:

  • ❌ Destroy trust
  • ❌ Likely rejection
  • ❌ Possible criminal charges

Voting Options for Creditors

1. Vote to Approve (As Proposed)

Unconditional approval:

  • Accept proposal as written
  • No changes requested
  • IVA proceeds exactly as proposed

Example vote:

"Bank A votes to APPROVE the proposal without modification.
Debt: £12,000"

2. Vote to Approve (With Modifications)

Conditional approval:

  • Approve if changes made
  • Specify required modifications
  • Must still get 75% including modifications

Common modifications requested:

Higher payment:

"Creditor B votes to approve IF monthly payment increased 
from £250 to £300. Debt: £8,000"

Longer term:

"Creditor C votes to approve IF term extended to 72 months 
instead of 60 months. Debt: £6,500"

Different equity release terms:

"Creditor D votes to approve IF debtor agrees to 
compulsory equity release in year 5 with no extension 
option. Debt: £9,000"

If modifications requested:

  • IP considers if reasonable
  • You must agree to modifications
  • If you agree: Modified proposal approved
  • If you disagree: Proposal fails

3. Vote to Reject

Outright rejection:

  • Do not approve
  • No modifications offered
  • Want bankruptcy or full payment

Example vote:

"Creditor E votes to REJECT the proposal.
Reason: Dividend insufficient, prefer bankruptcy.
Debt: £4,000"

Why creditors reject:

  • Dividend too low
  • Don't trust debtor
  • Think bankruptcy better
  • Unhappy with circumstances
  • Recent credit to them specifically

4. No Vote Submitted

Abstention (effectively):

  • Form not returned
  • No position stated
  • Doesn't count toward 75%

Reasons for non-voting:

  • Oversight
  • Too small to bother
  • Can't be located
  • Indifferent to outcome
  • Already written off debt

Large Creditor Dynamics

Single Large Creditor (Over 25%)

Significant power:

  • Can block approval alone (if over 25% of debt)
  • Their vote crucial
  • May demand modifications

Example:

Total debt: £40,000
Creditor A (bank): £30,000 (75% of debt)
Other creditors: £10,000 (25% of debt)

If Creditor A votes NO:
Maximum approval possible: 25% - FAILS ❌

Creditor A effectively has veto power

IP strategy:

  • Engage large creditors early
  • Address their concerns
  • Negotiate modifications if needed
  • Ensure proposal meets their criteria

Multiple Large Creditors

Coalition effect:

  • Top 2-3 creditors often control 60-80% of debt
  • If they agree, approval likely
  • IP focuses communication on them

Example:

Total debt: £50,000
Creditor A: £20,000 (40%)
Creditor B: £15,000 (30%)
Creditor C: £10,000 (20%)
Others: £5,000 (10%)

If A + B approve: 70% - not quite enough
If A + B + C approve: 90% - APPROVED ✅

Special Creditor Types

HMRC (Tax Debts)

HM Revenue & Customs:

  • Often large creditor
  • Follows strict guidelines
  • Less flexible than banks
  • May object to low dividends

HMRC considerations:

  • Is IVA return better than bankruptcy?
  • Has taxpayer been compliant?
  • Are current tax obligations being met?
  • Is income disclosure accurate?

HMRC typically approves if:

  • ✅ Better return than bankruptcy
  • ✅ All tax returns filed
  • ✅ Current year tax being paid
  • ✅ Full disclosure of income

Council Tax Arrears

Local authorities:

  • Priority creditors (normally)
  • Included in IVA as unsecured
  • Usually vote to approve
  • Want payments more than bankruptcy

Generally supportive of IVAs

Financial Institutions (Banks, Credit Cards)

Major banks:

  • Experienced with IVAs
  • Follow consistent policies
  • Usually approve reasonable proposals
  • May request modifications

Typical bank approach:

  • Review dividend calculation
  • Compare to bankruptcy
  • Check for red flags
  • Vote based on return

Approval rate: 70-80% typically

Payday Lenders

High-interest lenders:

  • More likely to object
  • May claim recent lending
  • Often vote no
  • But small debt = small vote

Strategy: Ensure other creditors outweigh them

Utility Companies

Gas, electric, water providers:

  • Usually approve
  • Want payment more than write-off
  • Arrears often significant
  • Rarely object

Store Cards and Catalogues

Retail creditors:

  • Usually approve
  • Standard voting patterns
  • Follow similar guidelines to banks

Modifications and Negotiations

Common Modification Requests

1. Higher monthly payment

Original proposal: £200/month
Modification: £250/month

If you can afford: Accept modification
If you can't: Proposal may fail

2. Extended term

Original: 60 months
Modification: 72 months (6 years)

Consideration: 12 months longer, more total paid

3. Guaranteed equity release

Original: Attempt release, extend if can't
Modification: Must release equity, no extension option

Risk: If genuinely can't remortgage, IVA may fail year 5

4. Windfall percentages

Original: 50% of bonuses to IVA
Modification: 100% of bonuses to IVA

Impact: Less benefit from income increases

Can You Reject Modifications?

Yes, but:

  • If you reject, proposal fails
  • Back to square one
  • Bankruptcy may follow

Decision factors:

  • Can you afford modification?
  • Is it reasonable?
  • What's the alternative?

Most people accept reasonable modifications

IP's Role in Negotiations

Before decision procedure:

  • IP may contact large creditors
  • Discuss concerns
  • Negotiate terms
  • Amend proposal if agreed

This pre-negotiation:

  • ✅ Increases approval chances
  • ✅ Addresses objections early
  • ✅ Streamlines process

Decision Day - What Happens

The Deadline

Typical deadline: 12:00pm (noon) on decision day

All votes must be received by this time:

  • Electronic votes
  • Postal votes
  • Proxy votes

After deadline:

  • No more votes accepted
  • IP begins counting
  • Results compiled

Counting the Votes

IP's process:

  1. Verify each vote (proper creditor, valid form)
  2. Calculate debt value per vote
  3. Separate YES, NO, and MODIFICATIONS
  4. Calculate percentages
  5. Determine if modifications accepted (if you've agreed)
  6. Declare result

Takes 1-4 hours typically

Result Announcement

IP notifies:

  • You (the debtor)
  • All creditors
  • Any guarantors

Methods:

  • Email
  • Phone call
  • Formal letter
  • Online portal update

Same day usually (afternoon of decision day)

Possible Outcomes

Outcome 1: Approved Without Modifications ✅

Best case scenario:

  • 75%+ voted yes
  • No modifications requested
  • Proposal proceeds exactly as written

What happens next:

  • IVA legally binding immediately
  • Creditor protection starts
  • First payment due (usually within 7 days)
  • Completion certificates sent within 28 days
  • Your IP becomes supervisor

Timeline to first payment:

Decision day: Tuesday
Approval announced: Tuesday afternoon
First payment due: Following Monday
IVA officially begins: When payment received

Outcome 2: Approved With Modifications ✅

Conditional approval:

  • 75%+ approved with changes
  • You must agree to modifications
  • Modified terms become binding

IP contacts you:

  • Explains modifications requested
  • Discusses if acceptable
  • Needs your agreement

If you agree:

  • IVA proceeds with modifications
  • New terms apply
  • First payment due
  • Completion certificate reflects changes

If you disagree:

  • IVA fails (same as rejection)
  • Back to drawing board

Most common: Higher payment or longer term

Outcome 3: Rejected ❌

Proposal failed:

  • Less than 75% approved
  • Too many objections
  • Large creditor(s) voted no

What happens:

  • IVA does not proceed
  • No creditor protection
  • Back to original situation
  • Creditors resume normal collection

Your options:

  1. Revise and resubmit proposal

    • Address objections
    • Improve offer
    • Try again

  2. Try alternative debt solution

    • Debt Management Plan
    • Debt Relief Order (if eligible)
    • Consider bankruptcy

  3. File for bankruptcy

    • If no other option
    • Fresh start
    • Assets may be lost

  4. Continue struggling

    • Not recommended
    • Legal action continues
    • Situation worsens

Outcome 4: Postponement

Decision delayed (rare):

  • Insufficient votes received
  • Major creditor needs more time
  • Questions about proposal
  • Technical issues

IP may:

  • Extend deadline 14 days
  • Request additional information
  • Amend proposal
  • Reconvene later

Eventually: Will result in approval or rejection

Why IVAs Get Rejected

Common Rejection Reasons

1. Poor dividend (under 30%)

Creditors would receive more in bankruptcy
OR
Return too low to justify IVA

2. Unrealistic expenses

Budget doesn't match guidelines
Excessive non-essential spending
Can't be supported

3. Recent credit abuse

Credit taken shortly before IVA
Appears fraudulent
Creditor feels misled

4. Hidden assets

Asset discovered not declared
Trust destroyed
Fraud suspected

5. Unstable income

Self-employed with irregular income
Employment insecure
History of job changes
Payment sustainability questioned

6. Failed previous IVAs

Previous IVA failed
Creditors skeptical
Trust issue

7. Large single creditor objection

Creditor with 30%+ debt votes no
Enough to block approval
May have specific grievance

After Approval - Next Steps

Week 1: Confirmation

You receive:

  • Formal approval notification
  • IVA completion certificate (or "approval certificate")
  • Payment schedule
  • Supervisor contact details
  • Online portal access (if available)

First payment:

  • Usually due within 7-14 days
  • May be higher (includes nominee fee)
  • Sets up standing order/direct debit

Week 2-4: Creditor Notification

IP notifies all creditors:

  • IVA approved
  • Stop direct contact with you
  • All communication through IP
  • Freeze interest/charges
  • Stop legal action

You'll notice:

  • Creditor calls stop
  • Letters stop
  • Court action halted
  • Peace of mind begins

Month 1: IVA Living Begins

Your new normal:

  • Monthly payment to IP
  • Live within approved budget
  • Keep IP informed of changes
  • No new credit over £500

Creditor protection active:

  • ✅ No more enforcement
  • ✅ No more court action
  • ✅ No more bailiffs
  • ✅ Peace from creditors

Next milestone: First annual review in 12 months

After Rejection - What Now?

Understanding Why It Failed

IP will explain:

  • Which creditors voted no
  • Reasons given
  • Whether resubmission possible
  • Alternative options

Common reasons:

  • Large creditor objection
  • Dividend too low
  • Creditor concerns about affordability

Option 1: Revise and Resubmit

If failure was close (e.g., 70% approval):

  • May be possible to revise
  • Address specific objections
  • Improve offer
  • Resubmit to creditors

Revisions might include:

  • Higher monthly payment
  • Longer term
  • Better equity release terms
  • Additional lump sum

Timeline: Can resubmit within 4-6 weeks

Option 2: Alternative Debt Solutions

Debt Management Plan (DMP):

  • ✅ No approval needed
  • ✅ Flexible payments
  • ❌ No legal protection
  • ❌ No debt write-off

Debt Relief Order (DRO):

  • If debt under £30,000
  • If income under £75/month disposable
  • If assets under £2,000
  • 12-month write-off

Bankruptcy:

  • Fast debt write-off (12 months)
  • Fresh start
  • But lose assets
  • Public record

Option 3: Bankruptcy

If no alternative:

  • May be only option
  • File bankruptcy petition
  • Usually cheaper than expected (£680 fee)
  • Discharge in 12 months

Pros:

  • ✅ Fast (12 months)
  • ✅ Definite end
  • ✅ Pressure stops immediately
  • ✅ Most debts written off

Cons:

  • ❌ Assets sold (house, car over £1,000)
  • ❌ Public register (Gazette)
  • ❌ Certain professions restricted
  • ❌ Some debts survive

Summary

Creditors' meeting (decision procedure):

  • ✅ Usually virtual (no physical meeting)
  • ✅ 14 days for creditors to vote
  • ✅ Need 75% approval (by debt value)
  • ✅ One pound = one vote
  • ✅ Modifications possible
  • ✅ Result announced decision day

What creditors consider:

  • Return vs bankruptcy
  • Affordability
  • Cause of debt
  • Assets declared
  • Recent credit use
  • Honesty

Possible outcomes:

  • Approved (as proposed)
  • Approved (with modifications)
  • Rejected
  • Postponed

Approval rate: Approximately 80-85% of IVA proposals are approved

If approved: IVA begins, creditor protection starts, payments begin

If rejected: Revise, try alternative, or consider bankruptcy

Next steps:

Back to IVA Process Overview