Rejected IVA When DMP is right choice
Summary: Rejected IVA - This paper looks at options facing those whose IVA proposals have been rejected and examines the role of a Debt Management Plan (DMP) under such circumstances.
Reasons for an IVA failing
Fortunately most IVA's that are presented to creditors are accepted simply because the criteria for acceptance have been made clear and IVA's that don't meet that criteria are unlikely to be put forward. There are 1 or 2 creditors who have a policy of rejecting IVA's and if their share of the overall debt is significant the IVA won't work. Sometimes IVA's are not put forward by Insolvency Practitioners because of excessive expenditure expectations from the debtor, or too much in the way of assets.
Available options
For whatever reason an IVA has been rejected the debtor has to make a decision on next steps. The assumption is that returning to contractual repayments of debts is not an option - a debtor can't pay what they don't have. It leaves people generally with 2 possibilities - bankruptcy or a Debt Management Plan. Much will depend on personal circumstances and preferences as to which solution is pursued.
Bankruptcy advantages
A debtor whose IVA has been rejected or failed may well feel that they need to deal with the debts as decisively as possible. If there is disposable income then they may have to face 3 years of payments plus the lump sum fee to go bankrupt. But at least the end is in sight. However the bankruptcy route can present a serious problem for homeowners and for people working in the financial sector and some other jobs as well as company directors.
DMP advantages
A DMP may mean paying the debt back over a longer period than initially expected in the IVA. But for the homeowner or person in a job that bankruptcy will create serious issues for, it may well be the best route to follow. It provides debtors with an opportunity to repay their debt at an affordable rate with one monthly payment. Following a rejected IVA proposal, creditors will be looking for some plan to be in place by the debtor. A DMP can be set up quickly and may prevent any action from creditors.