If you are struggling with debt, you might be considering an Individual Voluntary Arrangement (IVA). An IVA is an arrangement that allows you to repay your creditors over five to six years. However, to determine if an IVA is the right choice for you, you must first meet certain eligibility criteria.

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Eligibility for an IVA

An Insolvency Practitioner (IP) will assess if you meet the following criteria for an IVA:

1. You are insolvent, meaning you cannot pay your debts.

2. You have at least £6,000 in eligible, unsecured debt (debt not secured against an asset, such as your home).  Some unsecured debts cannot be included, e.g. student loans or child support arrears.

3. You owe money to two or more creditors.

4. You have at least £100 in disposable income each month to put towards your debts.

5. You are a resident of England, Wales, or Northern Ireland.

See if you qualify >>

What if My Circumstances Change?

If you meet the criteria and your IVA is approved, it will be based on the terms agreed upon by you and your creditors. Since an IVA lasts five to six years, changes in your circumstances are likely. It’s crucial to keep your IP informed about any changes, such as:

  • Income changes
  • Job changes or job loss
  • Relocation
  • Receiving a windfall (like inheritance or a bonus)
  • Any unexpected events impacting your disposable income

Don’t worry if your situation changes; there are ways to adjust your IVA to accommodate your new circumstances.

Adjusting Your Contributions

If your financial situation worsens and is unlikely to improve, contact your IP. They might be able to reduce your monthly payments and creditor approval for this is not always necessary. Be aware that reducing payments could extend the duration of your IVA.

Settling Your IVA Early

If you can no longer make IVA payments, you might be able to settle it early. You’ll need to demonstrate why you can’t continue paying, such as due to illness, disability, or financial hardship. If your creditors agree, the remaining debt will be written off.

Payment Holidays

For short-term changes or emergencies, like an unexpected illness, your IP might grant you a payment holiday if you provide evidence. The duration of the IVA will be extended to cover the missed payments.

Increasing Contributions

If your financial situation improves, you may be able to increase your payments or pay off your IVA early. Additionally, if you receive a windfall, you will need to pay a portion of this toward your IVA.. Notify your IP within 14 days if you receive a bonus exceeding 10% of your take-home pay.

Can an IVA Fail?

An IVA is a legally binding agreement, and failing to adhere to its terms can lead to its failure. Your circumstances will be reviewed every six months. Unreported changes can cause your IVA to fail, but you will receive a breach notice explaining how to rectify the issue.

You may breach your IVA if you:

– Miss monthly payments

– Borrow money without getting permission from your IP, especially if the amount is more than £500.

– Fail to declare windfalls

– Refuse to cooperate with your IP

– Do not pay proceeds from asset sales into your IVA

Documents Needed for an IVA

If eligible for an IVA, you will need to provide certain documents to help your IP draft the agreement. These include:

– Proof of identity (e.g., passport or driving licence)

– Last three months’ income (e.g., payslips or benefit statements)

– Last three months’ bank statements

– Housing information (e.g., rent agreement or latest mortgage statement)

– Contact details and amounts owed to creditors

Additional documents or information may be required, so check with your IP to ensure you have all necessary paperwork.

Check if you’re eligible