Understanding Individual Voluntary Arrangements (IVAs)

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors, designed to help you manage and repay your debts over a set period of time, typically five years. Popular in the UK, IVAs offer an alternative to bankruptcy and can be an effective way to regain financial stability. In this guide, we’ll walk you through the essential criteria to qualify for an IVA, offering actionable advice to enhance your understanding and readiness for this financial solution.

Assessing Your Financial Situation

The first step to qualifying for an IVA is to rigorously assess your financial situation. This involves a detailed review of your income, debts, and living expenses. Most importantly, an IVA is suitable if you have a regular income, substantial unsecured debt, and are struggling to meet your monthly payments. If this sounds like your current situation, an IVA might be a viable option.

Minimum Debt Level Requirement

One of the pivotal criteria for an IVA is the minimum debt level. Generally, you should have a minimum debt of at least £6,000, although this figure may vary slightly depending on the advice of your insolvency practitioner (IP). These debts can include personal loans, credit cards, and other forms of unsecured debts.

Selecting a Certified Insolvency Practitioner (IP)

Your next step is to select a certified Insolvency Practitioner (IP). IPs are authorised professionals who can set up IVAs. They will act as the intermediary between you and your creditors. It’s crucial to choose an IP who is not only licensed but also experienced in handling IVAs, as they play a significant role in the success of the process.

Proving Your Ability to Make Regular Payments

A crucial requirement for an IVA is the ability to make regular payments towards your debts. You must demonstrate to your IP and creditors that you have a stable income sufficient to cover your essential living costs and make consistent contributions to your IVA. The amount you need to pay will be calculated based on what you reasonably afford after covering essential expenses.

Living Expenses Consideration

Understanding and categorizing your living expenses is essential. You need to prove that your spending is reasonable and necessary, leaving surplus income enough to cover IVA payments. This may involve adjusting your monthly budget to accommodate these payments, thus showing your commitment to resolving your debt situation.

Creating a Supportive Proposal

Working closely with your IP, you’ll need to craft a proposal for your IVA. This proposal details your financial situation, your proposed payments, and how your debts are to be handled. This proposal is then presented to your creditors during a creditors’ meeting. Approval from 75% of your creditors by debt value is needed to proceed.

Understanding the Approval Process

Finally, understanding and navigating the creditor approval process is critical. It involves a voting process where each creditor gets a vote proportional to the amount of debt you owe them. If the required majority of creditors agree to your terms, your IVA will be approved, and all included creditors will be bound by its terms.

Conclusion

Qualifying for an IVA is not a straightforward process, and it requires thorough preparation and a realistic assessment of your financial state. Begin by consulting a reputable guideline on IVAs and considering whether you meet the basic criteria. From there, seek the guidance of a certified Insolvency Practitioner, who will help you assess whether an IVA is the most appropriate debt resolution strategy for your situation.

With the right approach and professional assistance, you can navigate through the challenges of debt and work towards a more stable and secure financial future.