IVA arrangements are designed to help people with serious personal debt problems.
IVA arrangements are normal arranged to last 5 years, though this can sometimes be less, and after the successful completion of the IVA arrangement, the debtor is debt free.
The size of the IVA repayment is set prior to the IVA arrangement starting, and the repayments are calculated using a simple principle, that is the principle that the debtor will repay as much as they can afford to pay, once all their living costs have been deducted from their household income.
This link will take you to our article explaining in full the IVA repayment calculation.
As we have just explained, the IVA arrangement will be based on affordability to the debtor. However, there are some minimum requirements that the creditors will insist upon before they will agree to allow the IVA arrangement to begin.
The minimum criteria for an IVA agreement are:
- A debt of at least £12,000. This is the minimum level of debt that is considered suitable to enter into an IVA arrangement, due to the costs that your creditors will incur during the IVA process. Any debt level below this £12,000 limit would cease to offer creditors sufficient return on the debt, and would be therefore unacceptble at the creditors meeting.
- At least 2 individual creditors. By this we mean 2 different creditor companies, not 2 different debts. So if you owe your bank an amount for an overdraft account, plus a credit card and perhaps also a loan agreement, then this would constitute just 1 creditor for the purposes of the IVA, and you would still need more creditors to qualify.
- A minimum affordability of £150. This again is the minimum amount that creditors would accept as a monthly contribution. However, the minimum IVA repayments are calculated as a proportion of the debt you owe, therefore the larger the debt owed, the larger the IVA repayment needs to be for IVA qualification. Take this link if you would like help establishing whether or not you can afford an IVA
- You must be Insolvent. Which speaks for itself really. You need to be unable to continue with your existing contractual repayment structure and also you should not have the means available for you to settle all your debts by selling or releasing equity from an asset.
Applying for an IVA is quite a lengthy process. When asked how long does it take to set up an IVA the answer is usually agreed at being 5-6 weeks, added to this is the time the creditors need to be given in preparation for the creditors meeting.
If you would like an opportunity to discuss applying for an IVA then call My IVA Adviser on 0800 088 7503 and arrange a ‘no obligation’ consultation now.
Related Articles: