Are applying for an IVA and wondering if you qualify? This article highlights the qualifying criteria for an Individual Voluntary Arrangement (IVA) and answers some common questions relating to an IVA application.
How do I qualify for an IVA?
You will need to speak to an Insolvency Practitioner (IP), who will draft a proposal to send to your creditors on your behalf (your creditors will vote on it and 75% by value of debt will need to agree). Below are some qualifying requirements of an IVA, you should:
- Owe in excess of £10,000.
- Have 2 or more different creditors.
- Have an income, the majority of which is not received through benefits.
- Be able to afford to repay a minimum of 25% plus the costs of what is owed.
- Not have any realizable 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.
However, please bear in mind that just because you qualify for an IVA doesn’t necessarily mean it’s the most appropriate option for you. It’s important that you speak to an impartial advisor who will consider all of the options available to you.
Do I need to own a home to get an IVA?
One of the principal benefits of an IVA is that it will legally protect any assets that you own such as your home. However, owning your own home is not a requirement for entering an IVA.
Will I need to sell my house?
By entering into an IVA you will not be forced to sell your house. However, you may be asked to raise capital towards the end of your agreement to make a final payment to your creditors. This will depend on the value of the property and the other loans secured against it.
Can I apply for an IVA if I have a bank account with an overdraft?
You are still able to apply for an IVA if you have an overdraft. However, you would need to include the overdraft debt in the IVA, and you would not be able to continue using this account. In addition, you should not take out further borrowing during the term of your IVA, as this may break the terms of it.
Can I apply for an IVA if I own a company with shares?
An IVA does not have the same restrictions as bankruptcy and therefore you can continue to be a shareholder in the company. You may also want to read our article on IVA restrictions for more information.
Can I get an IVA if I got into debt by gambling?
Gambling will be seen as ‘culpable behaviour’ which means the IVA proposal might be rejected.
Can I apply for an IVA if I have secured loans?
You can apply for an IVA if you have secured loans but you cannot include secured loans in an IVA – a separate provision for monthly secured repayments will be part of the IVA. The first step is to speak to those 2nd charge lenders. If you’re able to demonstrate that you cannot meet your monthly payments, they have an obligation to consider stopping interest and charges. It might also be worth considering switching to an interest-only mortgage product if it frees up enough disposable income to help you through this difficult period.
If doing these things aren’t enough, it may be that petitioning for your own bankruptcy is your only realistic option. It all depends on how quickly you believe you’ll be back in work and whether the repayments are manageable until then. You must speak to an impartial debt advisor before making any decisions.
We would also suggest speaking to national housing charity Shelter, as they are specialists in dealing with housing debt.