How creditors vote on an IVA, and the rules they follow

Creditors who vote in favour must hold at least 75% of the debt owed to everyone who votes, and the IVA also fails if more than half of the debt owed to creditors unconnected to you is voted against it. It is a vote by value, not one vote per creditor, and creditors who stay silent are simply left out of the count.

These rules come from the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. IVAs are available in England, Wales and Northern Ireland. Northern Ireland has its own legislation (the Insolvency (Northern Ireland) Order 1989), so some details differ. Scotland has no IVAs: see debt solutions in Scotland.

How does the creditor vote work?

Once you and a licensed insolvency practitioner have prepared your proposal, the practitioner (called the nominee at this stage) sends it to every creditor with a report and a date by which they must decide. The law calls this a “creditors’ decision procedure”. Creditors must get at least 14 days’ notice.

In practice the vote happens by email, an online portal or in writing. A virtual meeting is possible. A physical meeting is only held if it is requested by creditors owed at least 10% of the debt, 10% of the creditors by number, or 10 creditors. Physical meetings stopped being the default on 6 April 2017, so older articles that tell you to “attend a creditors’ meeting” are out of date.

No court is involved in a normal IVA. Since 2003 you can propose one without first going to court for an interim order, and the nominee reports straight to your creditors.

Each creditor who wants to vote sends in a claim (a “proof of debt”) showing what you owe them. Under the IVA Protocol 2025, which sets the standard terms for most consumer IVAs, creditors should try to do this within 14 days of getting the proposal.

What does “75% by value” actually mean?

There are two tests, set out in rule 15.34 of the Insolvency (England and Wales) Rules 2016, and the proposal has to pass both.

1. At least 75% by value of the creditors who respond must vote for it.
2. It fails if more than half of the total value owed to creditors who are not your associates votes against it.

Here is a hypothetical example. Say you owe £30,000 to five creditors.

Only £25,000 of debt took part in the vote. The £20,000 voting for it is 80% of that, so the first test is passed. The £5,000 against is well under half, so the second test is passed too. The IVA is approved, and all five creditors are bound by it, including credit card B and the two that did not vote.

Now change one thing. If credit card A had voted against, only £12,000 (48%) would be in favour and the proposal would fail. Any single creditor owed more than a quarter of the debt that votes can stop an IVA on its own.

Why the second test exists

The second test stops a friend or relative you owe money to from pushing an IVA through against the wishes of your other creditors. Associates include your husband, wife or civil partner and relatives such as parents, children, brothers, sisters, aunts, uncles, nephews and nieces.

For example, suppose you owe your brother £30,000, a bank £6,000 and a credit card company £4,000, and all three vote. Your brother and the card company vote for it: that is £34,000 of £40,000, or 85%. But the bank’s £6,000 is 60% of the £10,000 owed to unconnected creditors, which is more than half, so the IVA is not approved.

Can creditors change your proposal?

Yes. Creditors can approve your IVA with changes, called modifications, such as a higher monthly payment or a different length. But the law says they cannot approve it with a modification unless you agree to each one. If you do not agree, the proposal is not approved in that form.

The IVA Protocol 2025 tries to keep modifications rare. It says creditors should avoid putting them forward unless in exceptional circumstances, and that a creditor who votes against a proposal that follows the Protocol should give reasons, which are kept on file. Neither rule takes away a creditor’s right to vote how it likes.

Secured creditors are treated differently. An IVA cannot take away a secured creditor’s right to enforce its security (for example, a mortgage lender’s right over your home) unless that creditor agrees.

Why do creditors reject IVA proposals?

Most creditors are businesses weighing up what they are likely to get back. The common reasons for a no are:

• The return looks too low. The Protocol says a protocol IVA is unlikely to be suitable if a debt management plan would clear your debts over a similar period with a significantly higher return to creditors.
• The budget does not look sustainable. If your spending figures look unrealistic, creditors may doubt you can keep paying for five or six years.
• The figures do not match what they know. Creditors can see your account history. Giving false information to get an IVA approved is a criminal offence, even if the IVA is later rejected.
• HMRC is a big creditor. Citizens Advice says that if most of your debt is income tax, National Insurance or tax credit overpayments, an IVA may not be the right option because HMRC will not usually agree.
• Your situation does not fit a protocol IVA. Very low debts, very low spare income, income mainly from benefits, disputed debts, or more than one property all make a protocol IVA unlikely to be suitable.

If your proposal is rejected, you are back where you started, and Citizens Advice says you will still have to pay any fees owed to the insolvency practitioner. That is one reason it pays to be sure an IVA fits before a proposal goes out.

What rules do creditors have to follow once your IVA is approved?

Approval binds every creditor who was entitled to vote, or would have been if they had been told about it. That includes creditors who voted against and creditors you forgot to list.

Under the standard terms, once the IVA has started no creditor may, for a debt included in it, take any action against you or your property, or start or continue court action against you. Interest and charges on those debts are frozen.

That does not mean you will never hear from them. The key facts document you get before signing says creditors may still write to you from time to time to confirm balances or send statements. Citizens Advice says creditors should contact your insolvency practitioner with any queries, and you should tell your practitioner straight away about any calls or letters asking you to pay.

The Protocol also expects creditors to treat you in line with the law and professional standards, using the FCA’s Consumer Duty as a benchmark, and to co-operate with your supervisor. A creditor that sends in its claim late can still share in future payments, but cannot undo payments already made to others.

What creditors can still do

• A secured creditor, such as your mortgage lender, can still enforce its security if you fall behind.
• A creditor whose debt cannot be included, such as child maintenance or a student loan, can still pursue you.
• If a debt is in joint names, the creditor can still chase the other person for all of it.
• If you break the terms of your IVA, the supervisor or any creditor can petition the court to make you bankrupt. See what happens if an IVA fails.
• Creditors vote again on any later change to the deal, such as cutting your payments by more than 20% or accepting a lump sum to pay off your IVA early.

What to do next

1. When you see a draft proposal, check the list of creditors line by line. If your debts turn out to be 25% or more above the figure in the proposal, that counts as a breach of the IVA later on.
2. Ask the insolvency practitioner which creditors hold the biggest shares of your debt and how they usually vote on proposals like yours.
3. Compare the IVA with the alternatives, particularly a debt management plan, which creditors do not vote on but also do not have to honour.
4. You can talk it through with a free, impartial adviser at MoneyHelper, StepChange, Citizens Advice or National Debtline first. See where to get free debt advice, or go back to IVAs explained.