Many people have turned to apply for an Individual Voluntary Arrangement (IVA) as a means of paying for their debts. An IVA is a relatively simple and easy way to combine your debts for easier management.
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However, even though it is a great debt solution, an IVA is not always the best debt management plan for everyone.
Let us study the IVa criteria and the requirements you need to meet to qualify for an IVA together as we go on.
Table of Content
- 1 How do I qualify for an IVA?
- 2 What information do I need to provide as evidence to qualify?
- 3 How much do I need to qualify for an IVA?
- 4 Which debts can qualify for an IVA?
- 5 Which debts will not qualify for an IVA?
- 6 Will my creditors agree to my IVA?
- 7 Summary
- 8 IVA Debt Help Information
- 9 Other Debt Solutions
How do I qualify for an IVA?
An Individual Voluntary Arrangement (IVA) is a debt solution that allows a person to pay for their unsecured debts with the help of an insolvency practitioner. However, not everyone can qualify for an IVA. There are several IVA criteria that can help you identify if you have the potential to apply for an IVA. The criteria commonly ask that a person have a regular income, owe at least two creditors with total debts not reaching £6,000, and that the individual is insolvent.
Let us look through the IVA criteria and see if you can qualify for an IVA before you attempt to submit an IVA proposal.
Many people wonder if having a steady stream of income will affect their chances of qualifying for an IVA. Having a regular income is a good thing because, since an Individual Voluntary Arrangement is a legally binding debt solution, you have to meet the monthly payments as part of the agreement.
The income can come from a job that is either full-time or part-time. It can also come from benefits you are receiving or a pension you are currently accepting. The income can also be from someone else, a party outside of the agreement, regularly providing for you.
Aside from what was mentioned, you can also use your assets or a lump sum in your IVA to qualify.
Make it a point to assure your creditors that your income stream is steady so that you can settle your monthly payments while still affording to pay for your essential needs. You also have to assure your creditors that you are living within youe means and not overspending.
Combined debts lower than £6,000
For you to qualify for Individual Voluntary Arrangements, all of your debts need to have debts that total to less than £6,000 but more than £5,000. This range is not officially declared, but this debt range is what is safe for people who want to submit an IVA proposal. If you have a debt total that is lower than £5,000, you may receive debt advice that encourages you to try an alternate debt solution.
At least two creditors
A creditor is a person or a company that lends money. To be considered for an IVA, you need to owe money to at least two creditors, be it people, a business, or a company. The creditors will be the ones to approve your IVA proposal once you get a recommendation. Your IVA proposal needs to be approved by at least 3/4 of your creditors, or 75% of the creditors you owe before you can start paying for the agreements and settling your debts.
If one is insolvent, you are not in a financial situation where you can pay your debts on time to your creditors. Being insolvent also means that your debts have a greater value than your assets, and your assets are your possession that has value and can be sold to pay off your debts. If your assets have a total value of more than your debts, you may not be qualified for an IVA.
Residing in England, N. Ireland, or Wales
Only the people who are currently residing in England, Northern Ireland, and Wales are qualified to apply for an IVA. If you live outside of these territories, you do not have the option to apply for an IVA.
What information do I need to provide as evidence to qualify?
After reading through the basic IVA criteria, you now have an idea whether or not you are qualified to apply for an IVA. If you are qualified to apply for an IVA, you will now work with your Insolvency Practitioners Association to prepare your IVA proposal.
There is a set of information you need to prepare and provide to help your insolvency practitioner build a good IVA proposal. Here is a summarised list of the things you can expect your insolvency practitioner to ask:
- an agreed-upon proof of identification
- your latest three payslips, if appropriate
- your latest three bank statements
- your current council tax bill
- a summary of your monthly income and your spending details
- your current housing details
- details of all of your current assets that have value
- a statement containing the details of all of our unsecured debt such as credit card debt, store card debt, catalogues, mortgages
- the contact details of all of the people and companies who are your creditors
Aside from these, there will also be a credit file check done. The credit file check will show any and all of the outstanding debts that you currently have. This information will also help your IP decide if there is a need to set up a call with your lenders to discuss debt balances, settlement, and reference numbers.
How much do I need to qualify for an IVA?
There are no up-front costs you need to prepare for when applying for an IVA. If your IVA proposal is approved, you proceed to settle your debts by paying the monthly repayments. On the other hand, if your IVa proposal is declined, you do not have to pay any fee at all.
Which debts can qualify for an IVA?
Not all kinds of debts qualify for an IVA. Here are the debts that are covered by Individual Voluntary Arrangements:
- Unsecured debts / unsecured loans
- Unsecured Credit cards
- Store Cards
- Payday Loans
- Doorstep Loans
- Debt Collection Agency
- County Court Judgements
- Council Tax Debts
- Benefit Overpayments
- Child Benefits
- Tax Credits and DWP
- Universal Credit Advances
- Gas Bill, Electric Bill, Water Bills
- Mortgage Shortfalls
- Property Rent Arrears
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Which debts will not qualify for an IVA?
Here are the debts that will not qualify for an IVA:
- Criminal Court Fines
- Fraud Debts
- DVLA Driving Fines
- Secured loan / Secured debt
- Current Mortgage or Secured Loan on home
- Charging Orders
- Current Rent Arrears
- CSA Arrears
- School Fines
- HP Agreements
- Log Book Loans
Will my creditors agree to my IVA?
A majority of your creditors need to agree and voluntarily accept your proposal before it legally binds both you and your creditors. There is no guarantee that the creditors will agree to your IVA, but the best thing you can do is to prepare as much as you can.
Many creditors understand that some of their clients can potentially fall into more difficult financial situations, making it harder to meet their financial commitments. The creditors understand that this is part of the business, and most of them make allowances for these kinds of situations, allowing them to write off bad debt.
How likely is an IVA to be accepted?
There is no guarantee that the creditors will accept an IVA, but many creditors are inclined towards accepting an IVA.
When a person applies for an IVA and submits an IVA proposal, the creditors are presented with a clear breakdown of returns they will receive when they accept an IVA. This comes along with a comparison to the returns they could potentially receive if the person who owes them declares bankruptcy instead. This information helps them make an informed decision about whether or not to accept an IVA.
What happens if my creditors don’t agree to an IVA?
If your creditors do not agree to an IVA, there are two things you can do with the help of your insolvency practitioner. First, if your insolvency practitioner believes your IVA proposal still has potential with a little tweaking, then you can regroup and redraft your proposal before submitting it again to be reviewed by the creditors.
On the other hand, you can also work with your insolvency practitioner to study other options. Your IP may have already considered other debt solutions for you. This may include remortgaging, filing for bankruptcy, or entering into an Informal Agreement.
It is important to remember that when choosing to go into an informal agreement, you have to be comfortable with the length of time you will be paying the debt in full.
An IVA is a great debt management plan that will help you get your finances back on track. An IVA can guide you towards paying different kinds of debt in full over a period of time, such as an unsecured debt. An IVA is not for everyone, and there are eligibility criteria that need to be met before you can qualify for an IVA.
The requirements include living within certain territories, such as Northern Ireland, an assurance that you can raise money to pay for the debt while still living within your means, and readily declaring how much spare income you have to pay for the debts.
If you do not qualify for an IVA, your insolvency practitioners can help explore other options to find a suitable debt solution for you, maybe even pursue bankruptcy if it fits your personal circumstances the best.
An IVA is a suitable solution for most debts but qualifying for it does not necessarily guarantee acceptance. It is still best to keep a level head while managing your expectations to quickly reach financial freedom.
IVA Debt Help Information
If you want to know more about the debt help plan of an IVA we have all articles related to individual voluntary arrangements here:
- Best IVA Companies in Manchester
- Best IVA Companies UK
- Can I Pay Off My IVA Early?
- How to Apply for an IVA
- Is an IVA Worth It?
- IVA and Inheritance
- IVA Companies to Avoid
- IVA Criteria
- IVA Debt Certificate
- IVA Examples
- IVA Forum
- IVA Process
- IVA Proposal
- IVA Protocol
- IVA Register
- IVA Reviews
- IVA Spending Restrictions
- Joint or Interlocking IVA
- Loans with an IVA
- Meeting of Creditors
- Mortgage with an IVA - Full Guide
- What Happens If an IVA Fails?
- What is an IVA?
- Why Creditors May Reject an IVA Application
Other Debt Solutions
An IVA is not the only debt solution you have and this is where speaking to a qualified debt advisor is very important.
After speaking to a debt consultant you might realise the best solutions are one of the following:
- Best DAS Companies
- Best Full and Final Companies
- Best IVA Companies in Manchester
- Best IVA Companies UK
- Best Sequestration Companies
- Best Trust Deed Companies
- Debt Consolidation Companies
- Debt Relief Order Companies
- DMP Companies
Make sure you take time to understand all the debt solutions available before making a decision because DMPs (aka debt management plans) are also a popular choice in the United Kingdom.