Can I Get an IVA?

Can I get an IVA?

If you struggle with debt, you might be considering an Individual Voluntary Agreement (IVA), which is an agreement that allows you to repay what you owe to your creditors over a period of five to six years. However, there are certain criteria you must meet to be eligible for an IVA before deciding if it’s the right option for you.

IVA Eligibility

An Insolvency Practitioner (IP) will look for a client that meets the following criteria for an IVA: 

• Insolvent, meaning you’re unable to pay your debts
• Has a minimum total of £6,000 of unsecured debt (credit not taken against an asset, e.g. your house) 
• Owes money to two or more creditors
• Has at least £80 spare income every month to pay towards debts
• Is a resident of England, Wales or Northern Ireland

What happens if my circumstances change?

If you meet the criteria and are approved for an IVA, it’s subject to the terms of the agreement between you and your creditors. As an IVA lasts between five and six years, your circumstances might change during that time. In this case, it’s essential that you keep your IP up to date. 

Changes might include:

• An increase or decrease in your income
• A job change or loss
• A house move
• A windfall, such as inheritance or a bonus at work
• Any kind of unexpected event that impacts your disposable income

Don’t worry if your circumstances do change as there are a number of ways that your IVA can be altered to fit your current or impending situation.

Reduce your contributions

If your financial situation has worsened and isn’t likely to get better, contact your IP. They may be able to reduce your monthly payments by up to 15% without needing permission from your creditors, depending on whether your IVA was made under the IVA protocol or not. Check with your IP and be aware that reducing payments will also likely extend your IVA. 

Settle your IVA early

If you can’t pay your IVA contributions anymore, you may be able to settle early. For this, you need to show why you can’t pay it, whether that’s due to sickness, disability or struggling with the cost of living. If your creditors agree, the rest of your debt will be written off.

Take a break from payments

If there’s been a short-term change in your circumstances or a temporary emergency, such as an unexpected illness that means you’re unable to work, your IP may give you a payment holiday if you provide evidence. If granted, your IVA will be extended to reflect the missed payments.

Increase your contributions

If your financial circumstances improve, then you may be able to pay off your IVA early or increase your monthly payments. You might also need to pay any money from a windfall into your IVA, if it has a windfall clause. If you get a bonus at work that’s more than 10% of your take-home pay, you will need to let your IP know within 14 days of receiving it. 

Can an IVA fail?

As an IVA is a legally binding agreement between you and your creditors, it can mean your IVA will fail if you don’t stick to the terms. Every six months, your circumstances will be reviewed and if there are any unreported changes, there is a chance the IVA could fail. However, it won’t fail instantly. You will receive a breach notice explaining how you’ve broken the terms and how you can put it right. 

You may breach your IVA if you:

• Miss your monthly payments
• Borrow more than £500 without informing your IP
• Don’t declare any windfalls
• Refuse to cooperate with your IP
• Fail to pay any money made from selling assets into your IVA

What documents do I need as evidence for an IVA?

If you are eligible for an IVA, there are documents you will need to provide, which will help your IP to draw up your agreement. These include:

• Proof of your identity, e.g. a passport or driving licence
• Last three months’ income, e.g. payslips and/or benefit statements
• Last three months’ bank statements
• Housing information, e.g. rent agreement or latest mortgage statement
• Contact details of your creditors and how much you owe them

There may be other documents, information or evidence needed so make sure to double check with your IP and have all your paperwork ready to make the process as smooth as possible.