IVA requirements

26 January2010

An IVA is a legally binding debt solution in which you`ll repay as much of your debts as you can afford over a set period of time, after which the remaining debt will be written off.

This can have a significant impact on your credit rating, but people who enter into an IVA accept this as it enables them to repay their debt and avoid bankruptcy (although bankruptcy can be the best option for some people).

What are the requirements for an IVA?

There are a few essential criteria that you will need to meet before you can enter into an IVA. They are:

  • You have debts that you cannot realistically afford to repay in full within a reasonable period of time, or you are facing a threat of bankruptcy
  • You can commit to regular monthly payments towards an IVA (usually at least £200, although this can vary depending on the amount you owe)

On top of these essential criteria are a few further `guidelines` that will normally need to apply to you - although you may be able to negotiate slightly different arrangements with your lenders:

  • Your debts may have to be over £15,000 in total
  • You may be expected to contribute most of any increase in income experienced during the IVA
  • If you`re a homeowner, you may be required to release some of the equity in your home in the final year of the IVA

What if I`m not eligible for an IVA?

If your debt adviser or Insolvency Practitioner believes that an IVA isn`t your best option, or if they don`t receive sufficient approval from your creditors for the IVA to go ahead, they may recommend an alternative debt solution.

If you really can`t afford to repay your debts in full, then one option might be bankruptcy - which, despite the consequences, can be the best option for some people.

On the other hand, if you think you will be able to repay the full debt over a longer timescale, a debt management plan might be more appropriate.

There are various debt solutions to help with different situations, and each has its advantages and disadvantages. Before committing to any debt solution, you should always discuss your options with an independent debt adviser.

For more information on the range of debt solutions available, click here or call 0800 195 2911 today.

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