Do you qualify for an IVA?
It’s a simple question that each IVA applicant must ask themselves at some point in the decision making process.
Technically, Individual Voluntary Arrangements (IVAs) are available to anyone with any level of debt, but because of the large numbers of people who have been experiencing financial difficulties over the last decade, the creditors have imposed certain qualifying criteria in an attempt to keep the volume of IVA applications under control.
So, do you qualify for an IVA - The following IVA qualifying criteria are guidelines used by the companies acting and voting on behalf of the creditors and are as follows:
- You should owe in excess of £15,000.
- You should have three or more different creditors.
- You should have an income, the majority of which is not received through benefits.
- You should be able to afford to repay a minimum of 25% plus costs of what is owed.
- You should not have any realisable assets which could be used to discharge your debt in full. For example, if you have substantial levels of equity in your property, or shares or savings such as endowment policies - with a value greater than the total amount you owe.
As already mentioned these points are only guidelines and each case should be treated on its own merits. Let us take each point one at a time:
That you are in full time employment.
Creditors are aware that IVAs are much more likely to be successful if the debtor is working full time, part-time or self-employed and therefore able to keep up with regular repayments.
That you should owe in excess of £15,000.
The qualify level of debt needed before an IVA can be considered as a possible solution is £15,000. Below this debt level the creditors find it difficult to recover enough money to make it financially ‘worth their while’, after they have paid the costs of your IVA
That you should have three or more different creditors.
If you has fewer than three creditors but you have a larger debt then you may still qualify for an IVA. So someone who owes £25,000 may only need to have two creditors and someone owing more than £40,000 may only need one creditor for an IVA to be acceptable though, obviously, this will be at the discretion of the creditor concerned.
That you should be able to repay a minimum of 25% of your debt, after the costs have been deducted.
Everyone wishing to enter into an Individual Voluntary Arrangement must be able to pay at least 25% of what is owed - plus costs - within the Individual Voluntary Arrangement’s term. Costs are the fees charged by the Insolvency Practitioner and are taken out of the contributions paid into the Individual Voluntary Arrangement by you. Because the level of debt varies in each Individual Voluntary Arrangement case, the monthly payment to the Individual Voluntary Arrangement will also vary, (Click here to find out what your IVA payment will be). This means that a debt of £25,000 will need an IVA contribution of £275 but a debt of £75,000 will need an IVA contribution of £480.
That you should not have any realisable assets which could be used to discharge your debt.
If, for example, you have a debt of £35,000, yet you own a £40,000 vintage motorcar which is sitting in your garage and if sold would clear your debt in full, then creditors would simply refuse to accept your IVA proposal. This would equally apply to other assets too, such as a holiday home or a caravan which if sold, would be able to clear your debt in full.
Please Note:
In the case of equity in the family home.
Equity in the family home can only be claimed if it is releasable.
Therefore, the family home is not at risk of being sold to force the release of equity, but instead, the home is only subject to the possibility of a re-mortgage. There are standard requirements that must be met before a re-mortgage can be requested.
They are as follows:
- You must be able to afford the re-mortgage repayments.
- You must be able to find a lender willing to give the re-mortgage.
- There must be sufficient releasable equity available.
To summarise, it is clear that achieving an Individual Voluntary Arrangement (IVA) is not something that can be decided without a careful analysis of the detail of each case. It is very important that each case is investigated thoroughly by an experienced Individual Voluntary Arrangement - IVA specialist or an Insolvency Practitioner.
Take this link to read a detailed explanation of the IVA debt solution and how it works.
If you would like to speak to an experienced IVA adviser with direct access to an Insolvency Practitioner call 0800 088 7503 or visit our specialist IVA website at My IVA Adviser to download any of the many free to download IVA guides which comprehensively deal with the IVA topic.
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