Yes, an IVA can be refused if creditors holding at least 75% of your total debt (by value) don’t vote in favour of it. But this doesn’t happen often — most IVA proposals are accepted because Insolvency Practitioners (IPs) know how to put together proposals that creditors will approve.
If your IVA is refused, you’re not out of options. You can reapply with a better offer, accept modifications suggested by creditors, try a different debt solution like a Debt Management Plan or Debt Relief Order, or consider bankruptcy.
How IVA Approval Works#
When you apply for an IVA, your IP drafts a proposal that includes all your financial details: income, expenses, debts, assets, and how much you can afford to pay each month.
This proposal is sent to all your creditors. They then vote on whether to accept it.
For your IVA to be approved, you need:
- At least 75% approval by debt value (not by number of creditors)
- This means if you owe £10,000 total, creditors representing at least £7,500 of that debt must vote yes
The vote is weighted by how much you owe each creditor. So if you owe £5,000 to one creditor and £500 to another, the first creditor’s vote counts ten times more.
Once 75% vote in favour, the IVA is approved. All creditors — even the ones who voted no — are legally bound by it.
Why Creditors Refuse IVAs#
There are several reasons a creditor might vote against your IVA proposal.
Unrealistic Payment Offer#
If your proposed monthly payment is too low compared to your income, creditors might reject it.
For example, if you earn £2,000 per month with £500 in disposable income but only offer £100 per month in IVA payments, creditors will question why you’re not offering more.
Your IP will work out a realistic offer based on your income and expenses. But if creditors think you’ve inflated your expenses or hidden income, they’ll vote no.
Incomplete or Incorrect Information#
Creditors expect full disclosure. If your proposal is missing information or contains obvious errors, they might reject it.
For example:
- You forgot to list a debt or an asset
- Your income and expenses don’t add up
- You claim unusually high living costs without explanation
- You didn’t declare regular overtime or bonus payments
Creditors have records of your financial history with them. If something in your proposal contradicts what they know, they’ll be suspicious.
Recent Debts#
If you’ve recently taken out new credit — especially in the six months before applying for an IVA — creditors might see this as reckless borrowing.
For example, if you got a new credit card three months ago and immediately maxed it out, the creditor will likely vote against your IVA. They’ll argue you borrowed money knowing you couldn’t pay it back.
This is less of an issue if you’re a long-standing customer and the debt built up over years.
Suspicion of Reckless Spending#
If creditors believe you lived beyond your means and spent recklessly without caring whether you could repay debts, they might refuse your IVA.
Examples include:
- Chronic gambling, drinking, or drug-related spending
- Luxury purchases while already in financial difficulty
- Multiple holidays or high-end purchases in the months before applying
If your proposal shows evidence of this, creditors will want proof that your behaviour has changed before they agree to write off part of your debt.
You Could Pay More with a DMP#
If creditors think you could repay them in full through a Debt Management Plan (even if it takes 6-10 years), they might reject the IVA.
A DMP isn’t legally binding, but some creditors prefer it if there’s a chance they’ll get all their money back — even if it takes longer.
That said, many creditors prefer IVAs because they’re legally binding and supervised by an IP. DMPs are informal and you can cancel them at any time.
Creditor Policies#
Some creditors have internal policies that set minimum repayment thresholds. If your offer falls below their threshold, they’ll automatically vote no.
For example, a lender might have a policy that they won’t accept less than 30p in the pound (30% of the debt). If your offer is 20p in the pound, they’ll reject it.
This is why experienced IPs know which creditors are likely to accept which offers.
What Happens If Your IVA Is Refused#
If your IVA doesn’t get 75% approval, you have several options.
Accept Modifications#
Creditors can approve your IVA on the condition that you make changes. These modifications might include:
- Increasing your monthly payment
- Extending the IVA term from 5 to 6 years
- Including assets (like equity in your home) in the repayment plan
- Reducing certain living expenses in your budget
You have 14 days to accept or reject these modifications. If you accept them, the IVA goes ahead with the changes. If you reject them, the IVA is refused.
Your IP will advise you on whether the modifications are reasonable and affordable.
Reapply with a Better Offer#
You can go back to the drawing board, adjust your proposal, and reapply.
This might involve:
- Offering higher monthly payments
- Cutting discretionary spending from your budget
- Including additional income (like a partner’s contribution)
- Addressing specific creditor concerns
If creditors gave reasons for rejecting the first proposal, your IP can address those in the new proposal.
Try a Debt Management Plan#
A DMP is similar to an IVA but isn’t legally binding. You make affordable monthly payments to your creditors, and they agree to freeze interest and charges.
DMPs are more flexible than IVAs — you can increase, decrease, or pause payments if your circumstances change. But creditors aren’t legally bound to accept a DMP, and they can still take legal action against you.
DMPs work well if you can afford to repay your debts in full over time (even if it takes 5-10 years).
Apply for a Debt Relief Order#
If your total debt is under £50,000, you have less than £75 per month spare income, and you own few or no assets, you might qualify for a Debt Relief Order (DRO).
A DRO lasts 12 months. After that, your debts are written off. It’s free to apply (as of April 2024) and you don’t make any payments during the 12 months.
But the eligibility criteria are strict, and a DRO will affect your credit file for 6 years.
Consider Bankruptcy#
If your IVA is refused and no other debt solution is suitable, bankruptcy might be your only option.
Bankruptcy writes off your debts (with some exceptions like court fines and student loans), but you’ll lose control of your assets. Non-essential assets can be sold to pay creditors.
Bankruptcy usually lasts 12 months, but it stays on your credit file for 6 years. It also affects certain professions and can impact future employment.
If you’re considering bankruptcy, get debt advice first. It’s a serious step and should be a last resort.
How to Avoid IVA Refusal#
Most IVA proposals are accepted because IPs know what creditors want. Here’s how to increase your chances of approval:
Be Honest and Thorough#
Disclose everything: all income, all expenses, all debts, all assets. Don’t hide anything or understate your income.
If you work overtime regularly, include it. If you get annual bonuses, declare them. If you own a car, list its value.
Creditors will check your information against their own records. If they catch you hiding something, they’ll reject the proposal.
Offer a Realistic Payment#
Your IP will calculate your disposable income based on your income and reasonable living expenses. This becomes your monthly IVA payment.
Don’t try to lowball the offer by inflating your expenses. Creditors know what reasonable living costs are, and they’ll challenge anything that looks excessive.
Work with an Experienced IP#
An experienced IP knows which creditors are likely to accept which offers. They’ll tailor your proposal to maximise the chances of approval.
If you use a reputable IP regulated by the Financial Conduct Authority (FCA), they’ll handle the negotiations and put together a strong proposal.
Address Creditor Concerns#
If a creditor has specific concerns — like recent debts or reckless spending — your IP can address these in the proposal.
For example, if you recently took out credit, you can explain the circumstances (like a family emergency) and show that it wasn’t reckless borrowing.
Be Prepared to Negotiate#
If creditors suggest modifications, consider them seriously. A slightly higher monthly payment or an extra year on the IVA term might be worth it to get the proposal approved.
Your IP will advise you on whether the modifications are affordable and in your best interest.
What Are Your Chances of Approval?#
Most IVA proposals are accepted. Industry data suggests approval rates are around 90-95% when you work with a reputable IP.
Why? Because IPs don’t submit proposals they know will fail. They assess your situation, work out what creditors are likely to accept, and only propose an IVA if it’s realistic.
If an IP advises you that an IVA isn’t suitable (because creditors are unlikely to accept it), they’ll suggest an alternative debt solution.
This is why it’s important to work with a qualified, FCA-regulated IP. They have the experience to navigate creditor expectations and put together proposals that get approved.
If you’re struggling with debt and want to find out what options are available, use our free IVA calculator to see how much you could write off. It takes 2 minutes and won’t affect your credit score.
Frequently Asked Questions#
Do all my creditors have to agree to the IVA?#
No. You only need approval from creditors holding 75% of your total debt by value. Once the IVA is approved, all creditors — even the ones who voted no — are legally bound by it.
Can I reapply if my IVA is refused?#
Yes. You can adjust your proposal and reapply. Your IP will work with you to address the reasons for refusal and put together a stronger proposal.
What if creditors suggest modifications I can’t afford?#
You don’t have to accept modifications. If the changes aren’t affordable, reject them and explore other debt solutions like a DMP or DRO.
How long do creditors take to vote?#
Creditors typically have 14 days to vote on your proposal. Your IP will notify you of the result once all votes are in.
Can creditors reject an IVA and then take me to court?#
Yes. If your IVA is refused, creditors can restart legal action (if they’d paused it). This is why it’s important to have a backup plan if your IVA doesn’t go ahead.
What if I didn’t disclose something in my proposal by mistake?#
Tell your IP immediately. It’s better to correct the mistake before the vote than to have creditors discover it and reject the proposal based on incomplete information.
If you’re struggling with debt and want to find out what options are available, use our free IVA calculator to see if you qualify and how much debt you could write off. It takes 2 minutes and won’t affect your credit score.