How to Qualify for an IVA

Having debts and how to pay them back is what almost all people most struggle with. Higher living standards, unfortunately, also come with a cost, we always need more and more money to maintain the same quality of life over the years. As prices go up and salaries mostly don’t, many times we find ourselves in a situation where we can’t afford certain things, or at least, not instantly. Therefore, we get loans, get ourselves into debt and the outcome is that we end up having problems paying them back. However, with good organization and payment planning no matter how low the income is, we will be able to see the light at the end of the tunnel.

What is an IVA Debt Advice?

Individual Voluntary Arrangement (IVA) could be the answer to most people’s money difficulties. With an IVA, you can only make a monthly payment that does not go over what you can afford. At the end of the 5-year-arrangement, you should be completely debt-free. IVA is a way of creating a legally binding agreement between the indebted and their creditors. As an Individual Voluntary Arrangement is a formal (legally binding) debt solution you will need an Insolvency Practitioner to help you deal with creditors and banks. For the time being, IVAs are available only to residents of England, Wales, and Northern Ireland. Trust Deed is a similar solution for the Scottish. 

IVA Criteria

To qualify for an IVA, you must meet certain requirements. First, you should be insolvent with a minimum debt of 5000 pounds. You should have a permanent job or any other financial security that ensures that you can pay your debt. Secondly, you should have at least 2 creditors and you will need to pay a minimum of 80 pounds per month into the IVA. Last but not least, you must reside in England, Wales, or Northern Ireland. The good news is that an IVA is likely to be able to write off up to 80% of what you owe. 

Advantages and Drawbacks of an IVA

However, as an IVA is the best bankruptcy alternative, there are certain drawbacks to be taken into account before applying. Firstly, your credit rating will be affected, as an IVA will negatively impact your credit rating. Secondly, you will have to follow a very strict budget and make sure all your monthly debts are paid on time. Moreover, if an IVA fails, your creditors may request your supervisor petitions for bankruptcy, or if you own a house you live in, you may need to release equity from your home. However, advantages are many if you manage to organize well and fulfill your IVA obligations: you finally put an end to your debt within a maximum of 5 years; an IVA protects assets by preventing your creditors from forcing you to sell them; elimination of any legal action of your creditors; IVA stops your debt from increasing; reduces stress and protects your reputation, etc. 

How to apply for an IVA

Once you have decided an IVA is the best solution to your debts, there are certain steps to be followed. Firstly, you must stop or pause any creditor action while your IVA is being set up. Secondly, you share your financial information to determine the amount of your affordable monthly payment, and then you put together a proposal that will be presented to your creditors and the court. Furthermore, a meeting will be called where companies will vote on whether they should accept your proposal. As long as creditors holding 75% of the debt agree it will go ahead and your IVA will become legally binding. Once your IVA is finally set up and first payments are made, you will no longer receive demands or calls from debt collectors. Certain professions might be affected by insolvency, so you should check your work contract before moving forward with an IVA. 

An IVA is not good for everyone, but it is safe to say that for tens of thousands of people, it is a good way of writing off up to 80% of their debt. If carried out properly, it will significantly reduce the enormous amount of stress that indebted people have to deal with, and make a positive change to their quality of life. Whether you are accepted onto an IVA or whether other options are better, depends on certain criteria and your current situation. But, compared to re-financing and many other options offered by a bank, IVA does seem like a more affordable solution.