How to Qualify for an IVA

If you’re struggling with debt in the UK, an Individual Voluntary Arrangement (IVA) can offer a way out. An IVA is a formal agreement between you and your creditors to pay off your debts over a set period, typically five years. Here’s a comprehensive guide on how to qualify for this debt solution.

Understanding an IVA

Before delving into the qualifications, it’s important to understand what an IVA really entails. An IVA is a debt solution that helps you manage your repayments and, upon successful completion, have any remaining unsecured debts written off. It must be set up and supervised by an Insolvency Practitioner. To read more about how an IVA works, visit Citizens Advice.

Are You Eligible for an IVA?

Qualifying for an IVA involves several criteria, primarily concerning your debt levels, your regular income, and your living situation. Below are the key factors considered:

Minimum Debt Level

Generally, you should have a minimum of £6,000 of unsecured debt spread across two or more creditors. This threshold can vary slightly depending on the advice provided by your Insolvency Practitioner.

Regular Income

You must have a regular source of income to qualify for an IVA. This reassures your creditors that you will be able to meet the agreed-upon payments. Proof of a stable income is necessary to proceed with an IVA application.

Residency Status

To apply for an IVA, you must be a resident in England, Wales, or Northern Ireland. Scottish residents are ineligible for an IVA but may consider a similar solution known as a Debt Arrangement Scheme (DAS).

Disposable Income

Your disposable income plays a crucial role in qualifying for an IVA. This is the amount left after all your essential living costs are covered each month. Usually, a minimum disposable income of around £100 is required to make the IVA viable.

Getting Started with an IVA

If you meet the basic eligibility criteria, the next step is to consult a licensed Insolvency Practitioner (IP). The IP will assess your financial situation in detail and advise if an IVA is appropriate for you. They will handle negotiations with your creditors and help draft your IVA proposal, which outlines how you intend to repay your debts. A good starting point in selecting a reputable IP can be found through the Insolvency Service.

IVA Application Process

Once you’ve selected an Insolvency Practitioner, they will work with you to gather all necessary documentation and draft your IVA proposal. Your creditors will then be invited to vote on the proposal. Approval requires 75% of voting creditors (by debt value) to agree. If approved, the IVA becomes binding on all parties, and you must adhere to the terms laid out.

Final Thoughts

An IVA can be a lifeline for those drowning in debt, but it’s not suitable for everyone. Careful consideration and professional guidance are crucial when deciding if it’s the right path for you. Ensure you understand both the benefits and obligations before proceeding. For more insights into navigating your debt relief options, keep exploring Debt Advice Foundation.