Do I Qualify For An IVA?
Do I qualify for an IVA? We understand that applying for an IVA can require a lot of research – it can sometimes be difficult to find out whether an IVA is right for your individual circumstances. Here we explain some of the eligibility criteria for applying for an IVA and what to do if you think you fall short of the criteria.
What is an IVA?
An IVA (Individual Voluntary Arrangement) offers a way to pay back multiple unsecured debts through single, affordable, monthly repayments. A legally binding agreement between you and your creditors, it can be quite flexible and tailored to suit your needs.
As an IVA is legally binding, it must be set up by a qualified individual – known as an Insolvency Practitioner. This person will work with you to identify suitable timescales and repayment plans, this is called an IVA proposal. The IVA proposal will be presented your creditors and – if they agree – the IVA comes into effect.
As well as helping deal with unmanageable finances, an IVA can be an effective way to gain protection against creditors and you may even be able to write off some of your debt.
Can I write off debt?Can I get an IVA?
Whether or not you’re eligible for an IVA depends on your personal circumstances. Generally, if you meet the following qualifying criteria then an IVA could be an option for you:
1. A regular income
Although you don’t have to be employed to qualify for an IVA, a payment plan must be agreed. Therefore, only those with a regular, sustainable source of income should apply. Although employment is recommended, this source of income could also include:
- Contributions from third parties
- Benefits
- Deductions from a large lump sum (for example, inheritance)
- Pension
2. Combined debts of at least £6,000
An Insolvency Practitioner will usually consider an IVA a suitable option if an applicant has combined unsecured debts of at least £6,000. However, the figure may be flexible - there is no official minimum debt level for an IVA but most practitioners will generally work with those who owe sums around this number.
3. The IVA is preferable to bankruptcy
For the IVA to be approved, your Insolvency Practitioner should be able to demonstrate that your creditors will receive a higher return through this solution than bankruptcy. It is for this reason that most creditors will agree to a reasonable IVA proposal.
4. You are based in either England, Wales, or Northern Ireland
IVAs are not available to those living in Scotland. However, something very similar exists called a Trust Deed. There are some differences, however, such as those handling the agreement are referred to as ‘trustees’ rather than Insolvency Practitioners.
5. You owe money to more than one creditor
Those who owe money to at least two creditors – and cover the criteria above – will usually be eligible for an IVA.
How much do I need to pay to qualify for an IVA?
The good news is that there are no up-front costs for an IVA. If your IVA proposal isn’t agreed by creditors, you won’t have to pay any fees.
The amount you repay will depend on your personal circumstances. During the IVA application process, your Insolvency Practitioner will help identify suitable repayment periods and timelines.