What must happen after creditors review a proposal in an IVA?

In the context of an Individual Voluntary Arrangement (IVA), after creditors have an opportunity to review a proposal, they have the right to either accept or reject it. This process is pivotal because the success of an IVA hinges on the approval of creditors, who need to feel that the terms laid out in the proposal are favorable and feasible compared to other options they might have, such as bankruptcy.

If creditors accept the proposal, it means they agree to the terms outlined for repayment over a certain period, usually resulting in a more manageable financial solution for the individual compared to other forms of debt resolution. On the other hand, if they reject the proposal, the individual does not automatically become bankrupt; instead, they may need to explore alternative solutions to manage their debts. The proposal must achieve a certain majority of creditor approval to proceed, but there is no requirement that all proposals be accepted.

The necessity for creditor approval highlights the collaborative aspect of an IVA, emphasizing creditor involvement in the process rather than unilateral decisions. This creates a balance where debtors can negotiate terms while keeping creditors’ interests in mind.