Can Anyone Apply For An IVA?

The companies who can arrange IVAs will naturally tend to promote the main benefits to people with serious financial problems, in particular that it is a way to write off a large part of your debts. This is only part of the story and it has to be understood that it is by no means the answer to every debt problem.

To begin with, the IVA is only an option in the UK, so unless you are a resident of Britain you will definitely not be able to use one. Also, you must have at least £15,000 in unsecured debts to three creditors or more. Unsecured debts are such things as credit card bills, payday loans and bank overdrafts. The things you cannot have included in an IVA are any type of secured debt (your mortgage for example) or council tax arrears or bills for goods bought on hire purchase.

If you meet the above criteria you may be eligible, but only if your overall financial situation is also appropriate. As well as having a lot of debts, you must have a job or source of income that will leave you sufficient money spare each month to make a payment into your IVA. This means you must have some cash left over after paying your priority debts such as mortgage, utility bills and basic living expenses.

For people in the above situation, an IVA could well be the answer to your financial problems. You start by applying to a specialist company to see if you are eligible. This usually means filling in a simple IVA form online, after which an advisor will make contact to get more details from you. Once they are satisfied that your situation is appropriate for an IVA, they will make you a formal proposal.

An insolvency practitioner will be appointed to look after the process and this person will make contact with all your creditors to see if they will agree to set up the individual voluntary arrangement. There will be a vote to see who supports the idea and who does not. For the arrangement to go ahead you need to have creditors representing a minimum of seventy five percent of your debts vote for it. If 75% of your debt is owed to one creditor, then you only need that person to vote for it and it can go ahead. Provided you reach this requirement, any creditors who do not want to join in have no choice but to be part of it too. This is one of the advantages of it being a legally binding agreement.

Once it is all set up, you just make one regular monthly payment and your insolvency practitioner shares it out among creditors in an agreed proportion. You just keep making the payments until the end of the agreement, which is usually five years. At the end of the arrangement any debts that are still unpaid are written off. IVA companies often boast that this can mean writing off up to 75% of your debts, but more typically it will be about half.