What Happens If Creditors Reject Your IVA Proposal?

For an IVA (Individual Voluntary Arrangement) to be approved, creditors holding at least 75 per cent of your total debt by value must vote in favour at a creditors' meeting. If this threshold is not met, the IVA proposal fails. This does not mean your debt situation is hopeless; it means you and your insolvency practitioner need to reassess the proposal or consider an alternative solution.

How does the creditors' meeting work?

Your insolvency practitioner submits your IVA proposal to all creditors listed in the arrangement. Creditors then vote by post or electronically; they do not typically attend a physical meeting in person. The vote is weighted by the value of each creditor's debt: a creditor owed £20,000 has more voting power than one owed £2,000.

If creditors holding 75 per cent or more of your total debt vote in favour, the IVA is approved and becomes legally binding on all creditors, including those who voted against it. If this threshold is not met, the proposal fails.

What are the most common reasons an IVA proposal is rejected?

Creditors reject IVA proposals for several reasons.

Your insolvency practitioner should be able to identify the specific objections raised and advise whether they can be addressed.

Can I revise and resubmit the proposal?

Yes. If creditors reject the proposal but indicate what changes would make it acceptable, your insolvency practitioner can amend the terms and put a revised proposal to the creditors' meeting. This is common and does not mean starting from scratch.

The revised meeting is typically adjourned and reconvened within a few weeks. Your insolvency practitioner will negotiate with the key creditors (those holding the largest share of the debt) before the reconvened meeting to improve the chances of approval.

If the revised proposal is also rejected, you will need to consider alternative debt solutions.

What are my options if the IVA is rejected?

If an IVA cannot be approved, the main alternatives are:

Debt management plan (DMP): An informal arrangement managed by a free debt charity such as StepChange. You make one monthly payment, which StepChange distributes to your creditors. A DMP has no legal status and creditors can still add interest, but it provides structure and reduces the risk of escalating debt action.

Debt relief order (DRO): Available if you owe less than £30,000 (as of 2024), have little or no assets, and have a low income. A DRO freezes your debts for 12 months and then writes them off. It is administered through an authorised intermediary and costs £90 to apply.

Bankruptcy: A more severe formal insolvency option. Your non-essential assets may be sold, your finances are managed by an official receiver for a period, and the bankruptcy appears on your credit file for six years. For some people with no assets and significant debt, bankruptcy provides a clean break that a failed IVA cannot.

How likely is it that my IVA will be rejected?

Outright rejection without the possibility of revision is uncommon when an experienced insolvency practitioner has prepared the proposal. Firms that specialise in IVAs, including those working with referrals from StepChange, typically have high approval rates because they assess viability carefully before submitting.

The risk of rejection increases if the proposed monthly payment is very low relative to the total debt, if the debtor has assets that creditors believe should be included, or if the figures in the proposal appear inaccurate.

Your insolvency practitioner should give you an honest assessment of the proposal's strength before it is submitted. If they have concerns, take them seriously and discuss adjustments before the creditors' meeting.

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Frequently Asked Questions

What percentage of creditors need to agree to an IVA?

Creditors holding at least 75 per cent of your total debt by value must vote in favour for an IVA to be approved. If this threshold is not met, the IVA fails. Note that this is 75 per cent of debt value, not 75 per cent of the number of creditors.

If some creditors vote against my IVA, does it fail?

Not necessarily. If creditors holding 75 per cent or more of your debt vote in favour, the IVA is approved and becomes binding on all creditors, including those who voted against it. A minority of creditors objecting does not prevent approval if the 75 per cent threshold is still reached.

Can I reapply for an IVA after rejection?

Yes. If your proposal fails, your insolvency practitioner can revise the terms and put a new proposal to creditors. There is no set limit on how many times you can apply, though each failed attempt costs time and may affect your creditors' willingness to engage. Address the specific objections raised before resubmitting.

What happens to my debts while an IVA proposal is being considered?

Creditors can still pursue you for debts during the proposal period. However, once you file an IVA proposal, an interim order may be granted by the court, which provides a short-term freeze on creditor action while the proposal is assessed. Speak to your insolvency practitioner about whether an interim order applies in your case.

Is bankruptcy always worse than a failed IVA?

Not always. For some people, particularly those with very large debts, no significant assets, and a low income, bankruptcy provides a faster and cleaner resolution than years of struggling with a debt management plan. The key differences are the impact on your assets, your ability to be a company director, and the public record. A free debt adviser at StepChange can compare the options for your specific circumstances.

Where can I get free advice if my IVA is rejected?

StepChange (0800 138 1111 or stepchange.org) and Citizens Advice (citizensadvice.org.uk) both offer free, impartial debt advice. Your insolvency practitioner should also explain your options following rejection. Do not take on any new borrowing or make large financial decisions before getting advice on the alternatives available to you.