IVA aceptance dividend criteria.How much??

[NBNA]

I find the Banks lack of transparency in their IVA acceptance criteria is just another one of their covet business practices which are now been ripped wide open and dangled like celebrity gossip in the news wires - from charges on personal account charge structures;to Payment protection selling and to the eye watering billion dollar loses in funny money transactions that the world had seen ignominiously.(credit crunch and rescue)

Unless banks publish through their 'trades body' what an acceptable level is then anything can happen.Metaphorically, think of this? If GCSE exams are marked like the IVAs are considered, I think many will be complaining to Ofstead for inconsistence. For example consider these three points raised in many post - Either 17p to the pound is acceptable or it isn't...either gambling away the money is worse than been made unemployed....or it is not....either a DMP should be better imposed than IVA or it is not and so on and so on. Differnt Banks say differnt things about all three?? I mean you don't see your bank charges different for different people the rules are clear -one rule for all.

Such woolly uncertainty seen over IVA acceptance or even credit scoring would not be allowed to operate in personal banking as FSA or OFT would see to that but seems to prevail in IVAS and is partly why people are concerned. The is a mystery behind IVA acceptance and there should not be.Why??

As an IVA holder I feel there is something wrong here and is not consistent with the principle of openess and fairness.

[MelanieGiles]

Creditors tell us that they review each case on its own merits and make a decision based on individual circumstances - and I do not believe we will see any statements (apart from HSBC) about their minimum acceptance criteria to be honest.

[Skippy]

Surely each case has to be considered on it's merits? I thought that was the whole purpose of an Individual Voluntary Arrangement?

[ianmillington]

An interesting point, but one with which I'm afraid I don't agree.

An IVA is not, cannot be, and should never be a "one size fits all" procedure. It is based upon the premise that all debtors are different, with varying abilities to pay and no 2 proposals will be the same. It's been that way since 1986 and I can't see it ever changing.

HSBC very famously published their acceptance criteria a couple of years back setting a hurdle rate of 40p in the £ (which still holds today if they have the majority vote). The result, a storm of protest and a petition to number 10 complaining about the restriction of access to the IVA procedure.

Previously there was the unwritten rule where creditors would not vote to accept IVAs if they showed less than 25p in the £. The result : loads of proposals providing for 26 p in the £ and the perception on the part of many individuals that so long as they got past that magic number they were OK.

By suggesting an "acceptance level" you appear to be advocating a hurdle that debtors must get over before they can do an IVA.

The current situation is:

1. Most creditors will now accept an IVA, even one with a low dividend so long as they see it to be sustainable i.e affordable - fair enough

2. They won't accept an IVA proposal if a Debt Management Plan would repay debts in 7/8 years or less - that's fair enough too

3. They will review the income and expenditure to make cuts where they see expenditure items to be excessive (although not to increase them where they don't think they are enough)

4. The starting point effectively has to be the CCCS guidelines, which in my opinion set a relatively harsh budget.

It isn't necessarily the final outcome that is crucial, often it's how you get there (or whether the creditors think you will get there) that counts. Generally the creditors representatives are quite happy to look at the wider picture too, and take each case on its merits. All those factors are very well known to those members of the insolvency profession who regularly produce IVA proposals, the detail may not be published but isn't that what the nominees fee is for - the exercise of skill and judgement in drafting a proposal and negotiating the deal?

The fact is that part of the statutory definition of an IVA is a compromise, which by definition means an element of free will on both sides. The problem with the HSBC position was that it removed one side of the compromise equation which then results in take it or leave it, itself intrinsically unfair. Once 1 side (invariably this will be the creditors) have hard and fast acceptance criteria for what is meant to be a voluntary process then there are bound to be people who simply can't meet them and they will be disenfranchised.

[NBNA]

Ian,
I appreciate the long reply. The points are clear and I know where you are coming from. The points I take especially are how by setting a minimum 'standard'then everyone will go for just above the minimum to beat the system or complain about its fairness over 40p to the pound as with HSBC' case.

I understand the need if you like not to 'not exclude' but include as many as possible and but by stipulating boundaries looks unfair.....

But I feel even where each case should be said to be considered on its individual merit without the p/£ boundaries,it is a mine field of decision making and littered with consistencies in practice.If legal stature operated like this there would be no law only Guidelines and Code of practices.I feel there should be some set interpretations.The irony is there are indeed but are kept under wraps by Banks.This is why.

I used to be a lab engineer for a Univ'. When we try to under stand how something works,but don't have the 'blueprint' we reverse engineer then we can see how the thing works as if we had the plans.

We can see how the creditors work by their actions from numerous post posted on here and everywhere else consisting of thousands of IVA chairman reports - if a study was ever done on them...thats a basic form of reverse engineering.

Now we know Creditors know what they want as they know what a perfect person to award a AAA credit rating is ...the unmistakable fact is they don't publish it in fear of public outcry to Dowining street and just because we therefore don't know it exist it still doesn't mean the creditors are operating without boundaries.

For example, you mentioned in Point 2 that DMP are rejected if it takes more than 7/8 yrs to repay.So thats a 'unwritten'rule.

Another,MBNA is pushing people on DMPS again that isn't consistent with other banks.NR's previous refusals to accept IVA and again operating on their yardstick of acceptance criteria.The list just goes on and on. It is a moving goal post and a list does exist on who gets acepted but we don't get to see it and we think therefore the cases are 'judged on invidual merit'.

Far from it.Its a case of the feet fittng a already made shoe and not of any size.

I heard of the fact that if the debt is less than 12 months old then IVA is rejected now when did this become part of the acceptance criteria and is every bank adhering to it. I am asking that there should be openess and not let the banks think there are 'no hard and fast rules' when there is and till they think they should tell us.

Business contractutal obligations and debt convenants are all directed by legal and accounting rules but IVA are governed almost by 'sentiments and events' and not set piece directives.

It creates inconsistency in decision making.

[ianmillington]

Yes, I can see where you are coming from as well.

The issue here is that in an IVA you have the unique position of people who can be bound, by law, to a contract they did not specifically agree to or indeed actually disagreed with. If you think about that as a legal concept, it's actually quite mind-blowing. It defies all legal precedent.

It's also worth mentioning that back in 1986 the IVA was never intended to be the vehicle with which to resolve the burgeoning consumer debt problem. It was intended as an alternative to bankruptcy. Full stop. It was targeted at people whose businesses were going through a rough time but had the prospects of recovery. When the IVA legislation was enacted, there were very few consumer IVA cases.

Now, you have the situation where you have an unprecedented number of people getting over their heads with debt problems, with the only thing (excluding bankruptcy) that provided the debtor with any real relief being an IVA. Further, the banks perception that certain members of the insolvency profession were happy to exploit it - and this led to a knee jerk reaction, which has only recently started to slacken.

To be fair if every bank had the same acceptance criteria the first one who didn't get past it would be claiming "cartel". So we have this uneasy balance where one creditor will have different expectations from another when considering a proposal. They are commercial differences mainly (or you might call some of them hobbyhorses). NR for example - its no use expecting to write off a 10 year loan that has 8 years to go with a 5 year IVA. MBNA want to see the debtor attempting an informal plan first - if the first sign of any trouble is an IVA proposal, then expect a bumpy ride if they have 25% or more of the vote. Others won't accept if the debt is less than 12 months old, presumably because they feel that at the time of application the debtor was already in trouble and shouldn't have applied. There is one distressed debt purchaser that I know of that would not vote to accept an IVA proposal even if it provided for payment in full.

So, yes, certain creditors do have their own agenda. I'm not saying it's right but these are things that any IP worth his or her salt will be fully aware of, and hence they are disclosed. The skill of the IP is matching those expectations to the ability of the debtor to comply with them. In the main we do OK I think, but it's not always easy.

Maybe when we get the SIVAs in place where a straight majority is needed with no modifications then there will be greater clarity, or perhaps not!