IVA Criteria - A useful checklist

If you live in England or Wales, this guide will help you figure out whether an IVA is the right solution for your debt problems or not. At the end of this article you will find a useful checklist to identify if you are eligible for an IVA.

Individual Voluntary Arrangement or simply IVA is a debt solution valid in the UK to control the mounting debt. It is a legal and government-backed process. Therefore, you have to hire a legal expert, called Insolvency Practitioner, to carry out this process on your behalf.
The Insolvency Practitioner draws a repayment plan for the Debtor to pay his debt over a five-year term.

IVA helps people avoid the most severe effects of Bankruptcy on their fiscal status.

In the early days of its inception, IVA was a simple document. There is not much of a change in the process nowadays, however, before opting for it you better assess your situation if you satisfy the IVA criteria.

Here typical checklist, which will help you in assessing whether you qualify for the IVA, or not.

IVA Criteria Checklist:

  • You owe a debt in pound sterling, which is over ₤15,000. It does not matter how many small debts you owe until the total amount is more than ₤15,000.
    In certain cases IVA may be accepted for amount below ₤15,000 providing that the Insolvency Practitioner Firm that you hired reduces its fee accordingly.
  • You must have three or more different Creditors. If you owe three debts to the same Creditor you do not qualify for the IVA.
  • Your disposable income should be more than ₤250 i.e. your income should satisfy your necessary living expenses and still ₤250 should be available for the monthly installment.
    Most of the IVA cases fail because Debtors do not have sufficient income.
  • To convince your Creditors for an IVA your debt should be at least one year old.
  • You must demonstrate reasonable and moderate living expenses for food, utility bills.
    Creditors, usually, dislike too small or too large living expenses.
  • Your Insolvency Practitioner must submit a positive Nominee Report to the Court. In his report he should present reasons to convince the Court that an IVA is a reasonable offer.
  • You should not have any assets, which are capable of disposal, which could pay off your outstanding debts. For example, equity release of your home or an expensive car, which may be sold.
  • IVA includes all types of unsecured debts; Credit Cards loans, Store Cards and bank overdrafts, as well as tax and VAT for the self-employed. However mortgages, secured loans and Hire Purchase are excluded from an IVA.
  • There is a factor of luck involved in the acceptance of your IVA i.e. the need of having the right type of Creditors.
    There are many Creditors who are unnecessarily aggressive and will refuse your proposal of the IVA without even discussing the merits of your case. Some other Creditors may reject your IVA, unless you guarantee to return a certain percentage of the actual owed amount.
    However most of the Creditors also prefer IVA to Bankruptcy. The reason for this is that they are aware that applying for Bankruptcy they probably loses even more money.
    Furthermore, if the Creditors accept your IVA they will enjoy the benefits of tax and VAT relief from the UK Government.

If you satisfy the above-mentioned IVA criteria you should consult an Insolvency Practitioner or a certificated IVA firm to analyze your case in detail (visit this page for a comprehensive list of accredited IP and IVA firms in your city).

An IVA expert will explore with you all the debt solutions and recommend an IVA only if apposite for your situation. However if you fail to qualify for these criteria, you can apply for a different solution. The two other commonly used alternatives for Individual Voluntary Arrangement are Debt Management Plan and Bankruptcy.

We encourage you to seek professional advice if you would like to apply for an IVA in UK. IVAs have implications and costs, make sure you understand how an IVA works clearly before applying.

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