Yes, an IVA can be refused. Approval generally requires at least 75% by value of creditors who participate and vote, subject to the connected-creditor safeguard. Acceptance is never guaranteed.
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 generally need:
- At least 75% approval by value of creditors who participate and vote, not by number of creditors
- Compliance with the additional connected-creditor safeguard where it applies
The vote is weighted by admitted claim value among participating creditors. A larger voting creditor therefore has more influence than a smaller one.
Approval generally requires at least 75% by value of creditors who vote, with an additional connected-creditor safeguard. Creditors entitled to participate are normally bound even if they voted against, but secured and excluded debts have separate rules.
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.
Creditors can apply voting policies or request modifications, but there is no reliable universal pence-in-the-pound acceptance threshold. Your insolvency practitioner should explain any creditor-specific objection or modification in the context of the full proposal.
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 an informal arrangement, not a legally binding version of an IVA. You make affordable payments and ask creditors to freeze interest and charges, but each creditor can refuse or later change its position.
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 qualifying debts are £50,000 or less, spare income is £75 a month or less, general assets are £2,000 or less, and you have no more than one domestic vehicle worth up to £4,000, you might qualify for a Debt Relief Order (DRO) in England or Wales. Other conditions also apply.
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? #
There is no dependable universal approval percentage for an individual proposal. Creditor mix, voting participation, affordability, asset treatment, fees and modifications all matter. Marketing approval rates can also exclude cases that were screened out before a proposal was issued, so they are not a personal forecast.
A licensed insolvency practitioner should recommend an IVA only after comparing every suitable alternative and deciding that the proposal is realistic. Ask what assumptions the draft makes, which creditors can materially affect the vote and what the backup plan is if the proposal is rejected or modified.
If you’re struggling with debt and want to find out what options are available, use our debt-options calculator for an initial comparison; it cannot confirm eligibility, approval or a write-off amount.
Frequently Asked Questions #
Do all my creditors have to agree to the IVA? #
No. Approval generally requires at least 75% by value of creditors who vote, not 75% of every listed debt, and connected-creditor rules also apply. Creditors entitled to participate are normally bound even if they voted against; secured and excluded debts are different.
Can I reapply if my IVA is refused? #
Another proposal may be possible, but it is not an automatic right to approval. First identify why the proposal failed, whether new information or terms genuinely change the outcome, and whether another debt solution is safer.
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? #
The formal notice states the decision date and voting instructions. Ask the insolvency practitioner for that timetable and the result report rather than relying on a generic number of days.
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.
Sources