IVA Proposal Preparation - Creating Your Detailed Plan

IVA Proposal Preparation - Building Your Case

Once you've chosen your Insolvency Practitioner and decided to proceed, the next critical stage is preparing your IVA proposal. This is the formal document that will be sent to your creditors, explaining your financial situation and requesting their approval for your IVA. Quality preparation here significantly impacts approval chances.

What is the IVA Proposal?

Purpose

The proposal is a comprehensive document that:

  • Details your complete financial situation
  • Explains why you need an IVA
  • Shows what creditors will receive
  • Demonstrates the IVA is fair to all parties
  • Proves you can afford the payments
  • Compares IVA returns to bankruptcy alternative

Legal Requirements

The proposal must comply with:

  • Insolvency Act 1986
  • Insolvency Rules 2016
  • Statement of Insolvency Practice 3 (IVAs)
  • FCA regulations (if applicable)

Your IP is responsible for:

  • Accurate information
  • Professional standard
  • Full disclosure
  • Compliance with rules

Timeline for Proposal Preparation

Typical Duration: 1-3 Weeks

Week 1: Document gathering

  • Collect all required documents
  • Verify information
  • Complete financial forms

Week 2: Proposal drafting

  • IP prepares draft proposal
  • Statement of affairs completed
  • Supporting documents compiled

Week 3: Review and finalization

  • You review draft proposal
  • Make any corrections
  • Sign final documents
  • Proposal ready to send

Factors affecting speed:

  • How quickly you provide documents
  • Complexity of your situation
  • IP workload
  • Completeness of initial assessment

Documents You'll Need to Provide

Income Evidence (Last 3 Months)

If employed:

  • ✅ Payslips (last 3 months)
  • ✅ Employment contract (if available)
  • ✅ P60 (most recent)
  • ✅ Bank statements showing salary deposits

If self-employed:

  • ✅ Latest tax return (SA302)
  • ✅ Business bank statements (3-6 months)
  • ✅ Profit and loss statement
  • ✅ Accountant's letter (if applicable)

If receiving benefits:

  • ✅ Benefit award letters
  • ✅ Universal Credit statements
  • ✅ PIP/DLA award letters
  • ✅ Pension statements

Other income:

  • ✅ Rental income evidence (tenancy agreements, bank deposits)
  • ✅ Maintenance/child support evidence
  • ✅ Investment income statements
  • ✅ Pension income statements

Expenditure Evidence

Housing costs:

  • ✅ Mortgage statement (most recent)
  • ✅ Tenancy agreement
  • ✅ Council tax bill (current year)
  • ✅ Buildings/contents insurance policies

Utilities:

  • ✅ Gas bill (recent)
  • ✅ Electric bill (recent)
  • ✅ Water bill (recent)
  • ✅ Phone/internet/TV bills

Transport:

  • ✅ Vehicle insurance certificate
  • ✅ Road tax reminder
  • ✅ MOT certificate
  • ✅ Fuel receipts (if claiming high fuel costs)
  • ✅ Finance agreement (if car on finance)

Other regular expenses:

  • ✅ Childcare invoices
  • ✅ School uniform/trip costs
  • ✅ Prescription prepayment certificate
  • ✅ Life insurance policy

Debt Documentation

For each creditor:

  • ✅ Most recent statement
  • ✅ Original credit agreement (if available)
  • ✅ CCJ documentation (if applicable)
  • ✅ Arrears letters
  • ✅ Default notices
  • ✅ Court claims

Information needed per debt:

  • Creditor name and address
  • Account number
  • Current balance
  • Arrears amount
  • Monthly payment (if paying)
  • Interest rate
  • Security (if secured)

Asset Documentation

Property ownership:

  • ✅ Property deeds
  • ✅ Mortgage statement
  • ✅ Recent valuation (if available)
  • ✅ Land Registry document
  • ✅ Joint ownership agreement

Vehicles:

  • ✅ V5C (log book)
  • ✅ Finance agreement (if applicable)
  • ✅ Recent valuation (online estimate okay)

Other assets:

  • ✅ Savings account statements
  • ✅ Investment statements
  • ✅ Pension statements
  • ✅ High-value item receipts (jewelry, etc.)

Identity Documents

Required:

  • ✅ Passport or driving license
  • ✅ Proof of address (utility bill, council tax)
  • ✅ National Insurance number

For verification:

  • Identity confirmation
  • Credit file accuracy
  • Fraud prevention

The Proposal Document Structure

Section 1: Executive Summary

Brief overview (1-2 pages):

  • Your name and address
  • Total debt amount
  • Proposed payment
  • Estimated dividend to creditors
  • Key reasons for IVA
  • Comparison to bankruptcy

Example:

"Mrs Sarah Smith proposes an IVA to repay her creditors 
£18,000 over 60 months (£300/month). This represents 
approximately 45p in the pound to unsecured creditors. 
The alternative, bankruptcy, would likely yield 0-5p 
in the pound due to Mrs Smith's minimal assets."

Section 2: Personal Information

Your details:

  • Full name
  • Date of birth
  • Address (current and previous 3 years)
  • Marital status
  • Dependents
  • Employment status
  • Employer details

Purpose: Establish who you are and your circumstances

Section 3: Statement of Affairs

Detailed financial snapshot:

Assets:

  • Property value and equity
  • Vehicle value
  • Savings
  • Investments
  • Pension value
  • Other assets
  • Total asset value

Liabilities:

  • Secured debts (mortgage)
  • Unsecured debts (credit cards, loans)
  • Priority debts (arrears)
  • Total liabilities

Net position:

Example Statement of Affairs:

ASSETS
Property equity: £35,000
Vehicle: £2,500
Household contents: £3,000
Pension: £45,000 (excluded)
Total realizable assets: £40,500

LIABILITIES
Mortgage: £165,000 (secured)
Unsecured debts: £42,000
Total liabilities: £207,000

Net deficiency: £166,500

Section 4: Income and Expenditure

Monthly income breakdown:

Employment salary: £1,950
Child benefit: £180
Total monthly income: £2,130

Monthly expenditure breakdown:

Mortgage: £750
Council tax: £140
Utilities (gas, electric, water): £180
Food and housekeeping: £520
Transport: £220
Insurance: £65
Childcare: £200
Phone/internet: £45
Clothing: £80
Other essentials: £150
Total expenditure: £2,350

LESS: Priority arrears payment: -£120
Adjusted expenditure: £2,230

Disposable income: -£100

If showing deficit:

  • Explain how currently managing
  • Detail proposed changes
  • Show IVA creates positive position

Revised budget:

Total income: £2,130
Adjusted expenditure: £1,800 (reduced)
Available for IVA: £330/month
Proposed payment: £300/month
Buffer: £30/month

Section 5: Cause of Indebtedness

Detailed explanation (very important):

Common acceptable reasons:

  • Relationship breakdown (divorce, separation)
  • Illness/injury (unable to work)
  • Redundancy/job loss
  • Business failure
  • Benefits reduction
  • Income reduction
  • Unexpected expenses (emergency repairs)
  • Family crisis
  • Poor money management (honest admission)

What creditors want to see:

  • Honest explanation
  • Circumstances outside control (ideally)
  • Evidence you've tried to resolve
  • Recognition of problem
  • Commitment to IVA

Example:

"Mrs Smith's financial difficulties began in 2023 when 
her husband left unexpectedly. Previously a joint income 
of £3,500/month managed all expenses comfortably. Mrs Smith 
now solely responsible for all household costs on £2,130/month.

She initially tried managing with reduced spending and 
negotiated reduced payments with creditors. However, over 
18 months the situation became unsustainable. Interest and 
charges continued, and creditors began legal action.

Mrs Smith now seeks an IVA as a responsible way to repay 
what she can afford while gaining legal protection."

Section 6: Creditor List

Detailed schedule of debts:

Creditor Account No. Balance Arrears Type Security
Bank A CC 1234567890 £8,500 £850 Credit card None
Loan Co LC9876 £12,400 £1,200 Personal loan None
Bank B OD 0123456 £2,100 £0 Overdraft None
Store Card SC4567 £1,850 £370 Store card None
Council CT2425 £1,200 £1,200 Council tax Priority
Utility Co UC789 £650 £650 Gas arrears Priority

For each creditor:

  • Full name and address
  • Account reference
  • Current balance
  • Arrears (if any)
  • Monthly payment (if paying)
  • Creditor category

Total unsecured debt: Clearly stated

Section 7: Asset Realization

For each significant asset:

Property:

Property address: 123 Main Street
Ownership: Joint with ex-spouse (50%)
Current value: £250,000
Mortgage: £180,000
Gross equity: £70,000
Your 50% share: £35,000

Proposal: Equity release review year 5
- Attempt remortgage to extract equity
- If successful: Pay released equity to IVA
- If unsuccessful: Extend IVA 12 months (72 months total)

Vehicle:

Make/Model: Ford Focus 2018
Value: £5,000
Finance outstanding: £0
Essential for employment: Yes
Reasonable for circumstances: Yes

Proposal: Retain vehicle
Rationale: Essential for work, reasonable value

Other assets:

  • Pension: Excluded (protected by law)
  • Household contents: Excluded (normal household items)
  • Savings: Minimal (£200 emergency fund)

Section 8: Projected Dividend

The crucial calculation:

CONTRIBUTIONS
Monthly payment: £300
Duration: 60 months
Total contributions: £18,000

Potential equity release (year 5): £20,000
(or 12-month extension: £3,600)

Total funds available: £38,000-£41,600

FEES
Nominee fee: £1,500
Supervisor fee (18%): £6,750-£7,490
Total fees: £8,250-£8,990

TO CREDITORS: £29,750-£32,610

Total unsecured debt: £42,000

ESTIMATED DIVIDEND: 70.8-77.6p in pound

Comparison to bankruptcy:

BANKRUPTCY ALTERNATIVE
Realizable assets: £2,500 (vehicle over £1,000 exemption)
Less trustee fees (35%): -£875
Available to creditors: £1,625

Dividend in bankruptcy: 3.9p in pound

IVA ADVANTAGE: 66.9-73.7p more per pound

This comparison is vital - shows IVA is better for creditors

Section 9: Modifications and Terms

Standard IVA terms:

Duration: 60 months (5 years)

Payment adjustments:

  • Annual review of income/expenses
  • 50% of income increases added to payment
  • Income decreases may reduce payment
  • Payment breaks available (max 6 months typically)

Windfall provisions:

  • Inheritance: Paid to IVA
  • Bonuses: 50% to IVA
  • Tax refunds: To IVA
  • Lottery/gambling wins: To IVA
  • Redundancy: Assessed case-by-case

Equity release (if homeowner):

  • Year 5: Property revaluation
  • Attempt remortgage
  • Release equity if possible (typically 85% LTV limit)
  • If can't release: Extend 12 months

Credit restrictions:

  • No credit over £500 without IP approval
  • Inform IP of any credit applications
  • No new borrowing

Occupation restrictions:

  • Certain professions affected (accountants, IPs, some financial roles)
  • Must inform IP if occupation changes

Section 10: IP's Comments

Professional assessment:

  • Why IVA is appropriate
  • Likely creditor response
  • Risks and mitigation
  • IP's recommendation

Example:

"In my professional opinion, this IVA proposal offers 
creditors a significantly better return than bankruptcy, 
estimated at 70-77p/£ versus 3-4p/£ in bankruptcy.

Mrs Smith has steady employment and realistic budgeting. 
The proposed payment of £300/month is affordable and 
sustainable.

I recommend creditors approve this proposal."

Section 11: Nominee's Report

Formal confirmation:

  • IP has investigated the proposal
  • Information appears accurate
  • Proposal compiled according to rules
  • IP willing to act as Supervisor
  • Creditors' meeting arranged (or decision procedure)

Your Role in Proposal Preparation

What You Must Do

1. Provide all documentation promptly

  • Complete within 1-2 weeks if possible
  • Don't delay IP's work
  • Ask if anything unclear

2. Be completely honest

  • Don't hide assets
  • Don't understate income
  • Don't exaggerate expenses
  • Disclose everything

3. Review draft carefully

  • Check all figures accurate
  • Verify creditor list complete
  • Confirm expenses realistic
  • Read entire document

4. Ask questions

  • Understand everything
  • Clarify confusing sections
  • Confirm you agree with proposal

5. Sign declaration

  • Confirms information true and complete
  • You understand proposal terms
  • You agree to be bound by it

What Your IP Does

Document compilation:

  • Drafts proposal document
  • Completes Statement of Affairs
  • Prepares creditor schedules
  • Writes professional assessment

Verification:

  • Checks credit file
  • Verifies employment
  • Confirms debt balances
  • Validates information

Calculation:

  • Disposable income
  • Projected dividend
  • Fee breakdown
  • Comparison to bankruptcy

Professional opinion:

  • Suitability assessment
  • Creditor approval likelihood
  • Risks identification
  • Recommendations

Common Proposal Challenges

Challenge 1: Income vs Expenses Shows Deficit

Problem: Expenses exceed income on paper

Solutions:

  • Identify non-essential expenses to reduce
  • Include partner's contribution if appropriate
  • Show how currently managing (borrowed from family, etc.)
  • Demonstrate commitment to budget discipline

IP may:

  • Adjust expenses to guideline levels
  • Request evidence of expense reduction
  • Suggest higher contribution after trial period

Challenge 2: Large Equity in Property

Problem: Significant home equity makes equity release difficult

Solutions:

  • Explain remortgage challenges (credit damage, affordability)
  • Propose 12-month extension as alternative
  • Show commitment despite challenges
  • Consider third-party contribution

Creditors may:

  • Request higher monthly payment
  • Insist on equity release attempts
  • Require family member lump sum
  • Accept extension alternative

Challenge 3: Recent Credit Usage

Problem: Taken credit recently before IVA (looks like fraud)

Solutions:

  • Explain circumstances honestly
  • Show credit used for essentials
  • Demonstrate no luxury spending
  • Show debt problem was longstanding

Creditors may:

  • Object to including recent debts
  • Require higher dividend
  • Request police investigation (if extreme)

Timing matters:

  • Credit within 1-3 months: Very problematic
  • Credit 3-6 months: May raise questions
  • Credit 6-12 months: Usually acceptable

Challenge 4: Self-Employment Income Irregular

Problem: Income varies month-to-month

Solutions:

  • Use average of last 12 months
  • Conservative estimate
  • Build in lower payment initially
  • Increase at reviews when proven

IP may:

  • Request 12 months accounts minimum
  • Use tax return figures
  • Suggest 6-month review instead of annual
  • Propose graduated payment (starts low, increases)

Challenge 5: High Living Costs

Problem: Expenses seem excessive to creditors

Solutions:

  • Justify with evidence (large family, medical needs)
  • Compare to ONS/Insolvency Service guidelines
  • Show expenses reasonable for circumstances
  • Reduce non-essentials

Areas creditors scrutinize:

  • Food/housekeeping: Should align with household size
  • Transport: Must be necessary
  • Communications: Basic packages acceptable
  • Entertainment: Minimal during IVA

Proposal Quality - What Makes a Good Proposal?

Strong Proposal Characteristics

✅ Comprehensive: All information included, nothing missing

✅ Accurate: Figures verified, debts confirmed, income proven

✅ Honest: Transparent about situation, no hidden information

✅ Realistic: Affordable payment, sustainable budget, achievable plan

✅ Well-presented: Professional document, clear structure, easy to understand

✅ Good dividend: Creditors receive reasonable return (50%+ ideally)

✅ Better than bankruptcy: Shows significantly better return than alternative

✅ Supported by evidence: All claims backed by documentation

✅ IP endorsed: Professional recommendation included

Weak Proposal Characteristics

❌ Incomplete: Missing information, gaps in documentation

❌ Unrealistic expenses: Claims don't match guidelines or evidence

❌ Poor dividend: Creditors receive very little (under 30%)

❌ No better than bankruptcy: Similar or worse return

❌ Recent reckless credit: Credit taken shortly before IVA

❌ Hidden assets: Undisclosed property, vehicles, income

❌ Vague explanations: Unclear cause of debt, no detail

❌ Errors: Mathematical mistakes, wrong creditor details

After Proposal Completion

Final Review Meeting

You and IP review together:

  • Read through complete proposal
  • Confirm all information correct
  • Understand all terms
  • Discuss likely creditor response
  • Ask final questions

IP explains:

  • Next steps (creditors' meeting)
  • Timeline
  • What creditors will consider
  • Likely approval chances
  • What happens if approved/rejected

Signing the Proposal

You sign:

  • Proposal document
  • Statement of Affairs
  • Declaration of truth
  • Consent to act forms

What you're confirming:

  • Information is true and complete
  • You understand proposal terms
  • You agree to be bound by terms
  • You authorize IP to act

This is legally binding once approved

Proposal Sent to Creditors

IP sends:

  • Full proposal document
  • Statement of Affairs
  • Supporting documents
  • Voting forms
  • Notice of decision procedure (or meeting)

Creditors have:

  • 14 days to review (typically)
  • Time to ask questions
  • Opportunity to vote
  • Right to object or modify

Next stage: Creditors' Meeting (Decision Procedure)

Summary Checklist

Before proposal finalization, ensure:

  • ✅ All documents provided to IP
  • ✅ Income evidence complete (3 months)
  • ✅ Expense evidence provided
  • ✅ All debts listed
  • ✅ Asset values confirmed
  • ✅ Statement of Affairs accurate
  • ✅ Income/expenditure realistic
  • ✅ Cause of debt explained
  • ✅ Dividend calculation checked
  • ✅ Comparison to bankruptcy included
  • ✅ Read entire proposal
  • ✅ Understand all terms
  • ✅ Questions answered
  • ✅ Happy to proceed
  • ✅ Signed all documents

Quality proposal = higher approval chance

Next steps:

Back to IVA Process Overview