How to Qualify for an IVA in the UK

Struggling with debt is a common issue that many face across the UK. One of the solutions available to those in debt is an Individual Voluntary Arrangement (IVA), a formal and legally binding agreement between you and your creditors to pay back debts over a period of time. Here’s a guide on how to qualify for an IVA and whether it’s the right choice for you.

Understand What an IVA Is

An Individual Voluntary Arrangement (IVA) is a debt solution designed to help people repay their debts at an affordable rate. It’s set up as a formal agreement with your creditors and can last for a typical period of five or six years. During this time, you pay what you can afford outside of your essential living costs.

At the end of the IVA term, any remaining debt is typically written off. However, it’s important to understand that an IVA can affect your credit rating and is recorded on the Insolvency Register.

Check Your Eligibility

To qualify for an IVA, you need to meet certain criteria:

• Debt Level: Generally, you should owe at least £6,000, although this figure can vary.
• Number of Creditors: Typically, an IVA requires you to owe money to at least two creditors.
• Regular Income: You need to have a regular source of income to make monthly payments towards the IVA.
• Residency: You must be a resident in England, Wales, or Northern Ireland. Scotland has a similar scheme called a Protected Trust Deed.

Trusted Providers

Choosing a reliable IVA provider is crucial. It’s recommended to use providers that are authorized and regulated by the Insolvency Service. Consulting with an Insolvency Practitioner (IP) who will assess your situation and guide you through the process is essential. Find certified IPs via organizations like the Insolvency Practitioner Association.

Gather Your Financial Information

Before you can set up an IVA, you need to compile all relevant financial information. This includes:

• Proof of your debts
• Recent bank statements
• Proof of income
• Details of your living expenses

This documentation will be used to draft your IVA proposal, which will be presented to your creditors.

Understand the Impact on Your Life

Before entering into an IVA, understand that it will affect your financial situation and credit rating for a significant period. While it can provide relief from daily creditor contact and reduce monthly payments, it will affect your ability to obtain credit during the IVA term and potentially afterward.

Seek advice from financial experts to explore all your options. Organizations such as StepChange can provide free and impartial advice on whether an IVA is the best option for your circumstances.

Conclusion

An IVA can be a viable solution for those overwhelmed by debt. However, it’s crucial to fully understand the qualification process, the implications of an IVA, and the commitment required. Proper guidance from an Insolvency Practitioner and thorough planning can make the process manageable and lead to a financial fresh start.