What is the IVA criteria?
Generally speaking, an Insolvency Practitioner (IP) will look for a client to meet the following IVA criteria to qualify for an Individual Voluntary Arrangement.
- A minimum debt level of £5000.
- A minimum of 2 credit lines.
- A regular income.
- The ability to pay a minimum of £90 per month into the IVA.
- An IVA should offer a higher return for your creditors than bankruptcy.
- You must reside in England, Wales or N. Ireland.
Minimum Debt Levels
This can vary wildly from insolvency practitioner. Officially, there is no minimum debt level. The reason why £5000 is given as a guideline is that this is the most common figure that companies will work with when checking to see if a customer can qualify for an IVA. You may find when you have spoken to an IP that you debt level falls below £5000, often they will decide on a case by case basis as to whether they will accept you dependent on the amount of work involved.
Do I Need To Be Working To Apply For An IVA?
An IVA is a legally binding debt solution. It is important to maintain regular monthly repayments into your IVA, otherwise the IVA fails. You do not need to be working to apply for an IVA, although you will need a regular income. Your income could be from:
- Full time employment
- Part time employment
- A regular contribution from a third party
As long as you can afford to contribute a minimum of £70 per month into your arrangement, this is usually acceptable to get debt help. It is important to note that your IVA will be reviewed every 12 months to make sure that your IVA is still suitable and sustainable and you have affordable monthly payments.
A Better Return For Your Creditors
If your creditors are agreeing to make you completely debt free after 5 years, they need to make sure that the deal you are offering them is better than if they made you bankrupt. Bankruptcy may have a greater impact on your credit file than insolvency, although they are both similar in practice. Your IP will structure your IVA proposal in a way which makes an IVA more attractive to your creditors than bankruptcy, which is why they tend to accept the majority of proposal put forward to them. We would always recommend that you seek expert debt advice through a qualified advisor when you are considering insolvency or bankruptcy, as they will both have a negative impact on your credit rating. All insolvencies are placed on the Insolvency Register which can be viewed through a search function online (although IVA’s are not publicly advertised like bankruptcy is). It is always recommended to check out alternative solutions to an IVA too, sometimes a better option would be to look to either remortgage your house of take out a secured loan if your credit scoring supports it (based on your house being in a position of positive equity). All debt solutions have different advantages and disadvantages, your advisor will guide you through this to make sure the decision you make is right.
What Information Do I Need Provide As Evidence?
Although an IVA is a formal arrangement, the process doesn’t have to be particularly disturbing or out of the ordinary. Most advisors have dealt with thousands of customers, as insolvency is a common thing in the United Kingdom. When you are ready to apply for an IVA, you should have the following ready to supply:
- Your last 3 months payslips (if applicable)
- Your last 3 months bank statements
- Proof of identification
A credit check will be ran and in most instances this will bring up all of the outstanding debts which you may have. If there are any debts which are missing, you will be asked to supply evidence of these debts. This could be as simple as a recent statement, or your advisor could even arrange a conference call with your lender to confirm the outstanding balance, reference number and settlement figure.
To check if you are eligible for an IVA, use our handy IVA Calculator.