Do I qualify for an IVA?
Important: Fulfilling these criteria does not necessarily guarantee acceptance. Each IVA application is considered by creditors on an individual basis; they must be of the opinion an IVA the correct course of action for all involved.
Creditors are looking to people applying for an IVA to show their intentions to repay as much debt as is reasonably possible. The elements that contribute to a successful IVA proposal include as follows.
Where you live
You must be resident in England, Wales or Northern Ireland.
Amount of debt, number of creditors and IVA payments.
You need to have at least £8,000 of includable unsecured debts and be able to afford at least typically £80/month to pay into an IVA. These values are not defined by legislation and will vary between IVA providers to consider, and between creditors to accept.
The total amount owing must be shared between at least three separate debts, however, two of which can be the same creditor.
Typically, you are able to repay at least 10% or less than 90% of the initial debt over the standard 60-month duration of the IVA, the further form these extremes the more suitable an IVA.
Important: What you would pay into the IVA is your affordability based on guidelines and personal situation. If that shows you can afford, say £200 per month, that’s what you would be expected to pay in the IVA each month.
A common requirement is that the debt must be more than 72 times your IVA payments to make it worthwhile; otherwise, an inform debt management plan would be more appropriate which does not require formal insolvency.
Normally you must be insolvent
This is the inability to repay debts as they fall due, and these debts total more than your available assets. An IVA is not possible if personal wealth, such as property or other assets, significantly outweighs the debts.
If you were solvent – creditors could reject the proposal and pursue bankruptcy instead; as those assets could be used to raise money to pay the debts.
IVAs with more equity than debt.
If you already have bad credit, it can difficult to get a mortgage or secured loan to repay your unsecured debts. Therefore in such circumstances, we can look to see if an IVA is the best solution for all parties.
Payments must be affordable
Creditors need to be confident you can keep up the IVA payment. While the future is unknown, it is essential from the offset that you can show:
- A reasonably stable ongoing income.
- Being able to afford domestic needs without living in poverty.
- You are not spending excessively and are living within reasonable means.
Recent periods of unemployment, working through a probationary period or self-employment without proper accounts are factors which can harm an IVA application.
Recent borrowing and spending activity
Recently taken out loans, recent spending on credit cards and evidence of gambling on the bank statements are all areas creditors view differently. Some consider online bingo to be gambling. Some will vote against the proposal for these reasons. Unaccounted for or unreasonable recent excessive spending can also harm an application.
This may mean the IVA application may have to be put on hold or a month or two to clean up your bank statements.
Some creditors can be a problem
To get an IVA proposal passed by creditors, 75% of those who choose to vote must vote in favour. If one creditor holds more than 25% of the debt, they can block the IVA independently of how others vote. Some creditors are more inclined to vote against
Proof of circumstances
A declaration of assets and expected income should be made. Getting an IVA using false information is a criminal offence. An IVA proposal is a legal document so the applicant must evidence the proposal such as:
- Recent bank statement to confirm current payments
- Statements for all unsecured credit such as credit cards, store cards, catalogues, etc.
- Mortgage statement or tenancy agreement.
- Recent wage slips
- The current council tax bill, including details of arrears if applicable.
- Proof of identification.
- Hire purchase and secured loan documentation.
Tax Return for self-employed
If you are a sole trader or are self-employed then your tax returns (not payments) must but be up to date before an IVA can be considered.
If you have a poor record of tax payments, this can harm the chances of HRMC voting in favour, who are a majority creditor in many IVAs.
No Worse Than Bankruptcy
The IVA must offer a higher return to creditors than would be expected if you were made bankrupt.
The only way to truly know if you qualify for an IVA, and more importantly if creditors are likely to back it, is to get professional advice, so please contact us for full information as to your suitability.