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The qualification criteria for applying to enter into an Individual Voluntary Arrangement (IVA) is reasonably well defined and can be stated as follows -:
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The debtor must have at least £15,000 of unsecured debt. See next point for a definition of 'unsecured' debt. There are certain circumstances where an IVA will be approved at less than £15,000 providing the Insolvency Practitioner (IP) firm involved reduces its fees accordingly.
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Types of credit allowed into an IVA include all loans; credit cards; store cards; catalogues and overdrafts, as well as tax and VAT for the self-employed. Mortgages, secured loans and Hire Purchase are all excluded from an IVA.
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The debtor should not have any material assets capable of disposal which could pay off the debts (equity release on property; swapping a more expensive car for a cheaper version).
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Many IVA experts speak of the need for the debtor to owe money to at least 3 different creditors. There is actually no legal minimum number of creditors but the IVA firms usually like to see different creditors as this gives them more chances to get the IVA approved.
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The debtor will generally need to be in employment and certain IVA's can only be taken on if the debtor is earning a minimum monthly wage. However, there are IVA cases approved every year where this criterion is not met. For example if the debtor is on long term sickness benefits and has a partner working. If the debtors' partner is prepared to support the IVA application then the creditors are likely to accept it. Remember the creditors are looking to get at least some of their money back and in certain circumstances it looks like they don't mind exactly where that money comed from.
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An equally important IVA criterion is the need for the debtor to have “the right type” of creditors. There are creditors who will flatly refuse an IVA without even discussing the merits of the individual case. There are also creditors who will reject the IVA, unless the debtor guarantees a certain level of return. The creditors are fully aware that their rejection could well lead to the debtor applying for bankruptcy and then the creditors would lose even more money, so it's in their best interest to compromise.
An IVA is a very flexible financial instrument designed to help with a wide range of debt problems. The IVA criteria are not set in stone and most creditors will evaluate each case received on its own merits. If you think that you have a unique set of financial circumstances then rest assured that even if an IVA is not a best fit solution there will still be another way to clear your debts.
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