Understanding How to Qualify for an IVA

Struggling with debt can be an overwhelming experience, but there are mechanisms in place that can help. One of these is the Individual Voluntary Arrangement (IVA), a formal and legally binding agreement between you and your creditors to pay off your debts over a period of time. This blog post addresses how to qualify for an IVA, ensuring you have the information needed to consider this debt solution.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal agreement made between a debtor and their creditors, which allows the debtor to pay back their debts over a set period of time. It is an alternative to bankruptcy and must be supervised by a licensed Insolvency Practitioner.

Eligibility Requirements for an IVA

Not everyone can qualify for an IVA. There are specific conditions you must meet:

1. Residency

You must be a resident in England, Wales, or Northern Ireland. Scotland has a similar solution called a Protected Trust Deed.

2. Minimum Debt Level

Generally, you should have at least £6,000 of unsecured debt. Some IPs may require more, but this figure is a common threshold.

3. Number of Creditors

You need to owe money to two or more creditors to qualify for an IVA.

4. Sustainable Source of Income

An IVA requires you to make regular payments to your creditors, so you need proof of a regular, sustainable income.

5. Disposable Income

After covering basic living costs, you should have some disposable income. Generally, a minimum of £80-£100 per month is needed to make IVA payments.

6. Agreement from Creditors

At least 75% (by debt value) of your creditors who vote must agree to the IVA proposal for it to be approved.

Finding a Qualified Insolvency Practitioner (IP)

To set up an IVA, you need to work with a licensed Insolvency Practitioner. You can find a qualified IP through the UK Government’s Insolvency Service or through professional bodies such as the Insolvency Practitioners Association.

IVAs Impact on Credit Score

Before proceeding with an IVA, it’s crucial to understand its impact on your credit score. An IVA will stay on your credit report for six years from the date it starts. During this time, and probably for some time after, obtaining credit will be more difficult and potentially more expensive. Regular updates from Experian, Equifax, or TransUnion can help you monitor the changes in your credit score.

Conclusion

An IVA can be a powerful tool for managing and eliminating debt but isn’t suitable for everyone. Understanding the qualifications and implications of an IVA is crucial before proceeding. If you’re considering an IVA, consult with a licensed Insolvency Practitioner to explore your options fully and decide if it’s the right step for your financial recovery journey.

Remember, every financial decision comes with potential consequences, so informed choices are key. Discussing your financial situation with professional advisers or exploring other resources like the MoneyHelper can provide further insights and assistance.