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IVA : Do I qualify For An IVA ?
Technically, Individual Voluntary Arrangements (IVAs) are available to anyone with any level of debt, but because of the large numbers of people in financial difficulty, creditors have imposed certain qualifying criteria in an attempt to keep the volume of Individual Voluntary Arrangement - IVA applicants low.
These Individual Voluntary Arrangement (IVA) criteria are guidelines used by the accounting firms acting on behalf of the creditors and are as follows:
- That the debtor is in full time employment.
- That the debtor should owe in excess of £20,000.
- That the debtor should have four or more different creditors.
- That the debtor should be able to afford a minimum of 25% plus costs of what is owed.
- That the debtor should not have any realisable assets which could be used to discharge their debt. i.e equity in a property, shares or savings etc.
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 the debtor is in full time employment.
Creditors are aware that IVAs are much more likely to be successful if the debtor is working full time and therefore able to make regular repayments.
That the debtor should owe in excess of £20,000.
The qualifying level of debt for an Individual Voluntary Arrangement (IVA) can in some cases can be lower than £20,000, for instance, if a debtor owes between £15,000 and £20,000 but has five creditors or more the they may qualify for an Individual Voluntary Arrangement (IVA).
That the debtor should have four or more different creditors.
If a debtor has fewer than four creditors but has a larger debt then they may qualify for an Individual Voluntary Arrangement (IVA), so someone who owes £30,000 can have three creditors, someone who owes £40,000 can have two creditors and someone owing more than £50,000 may only need one creditor for an Individual Voluntary Arrangement (IVA) to be acceptable.
That the debtor should be able to afford a minimum of 25% plus costs of what is owed.
Any one wishing to enter into an Individual Voluntary Arrangement (IVA) must be able to pay at least 25% of what is owed plus costs within the Individual Voluntary Arrangement's (IVA's) term. Costs are the fees charged by the Insolvency Practitioner and are taken out of the contributions paid into the Individual Voluntary Arrangement (IVA) by the debtor. Because the level of debt varies in each Individual Voluntary Arrangement (IVA) case, the monthly payment to the Individual Voluntary Arrangement (IVA) will also vary, (Click here to find out what your Individual Voluntary Arrangement (IVA) payment will be), this means that a debt of £25,000 will need an Individual Voluntary Arrangement (IVA) contribution of £275 but a debt of £75,000 will need an Individual Voluntary Arrangement (IVA) contribution of £480.
That the debtor should not have any realisable assets which could be used to discharge their debt.
If a debt of £30,000 is owed and the debtor has realisable assets, i.e. a second home, a caravan or even equity in the family home, it is unlikely that an Individual Voluntary Arrangement (IVA) would be accepted, if the debt could be cleared when assets like these were sold.
In the case of equity in the family home. Equity can only be claimed if it is releasable. The family home is not at risk of sale to enable the release of equity, but only subject to the possibility of a re-mortgage, should a re-mortgage be affordable to the debtor.
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.
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 www.myIVA-Adviser.com to download any of the many free to download IVA guides which comprehensively deal with the IVA topic.
