What is the minimum amount of debt I need to have to qualify for an IVA?

March 16, 2018

If you have problem debts in Northern Ireland then you may be considering what type of debt solution is right for you. Choices range between informal agreements with your creditors to bankruptcy. However for many people an Individual Voluntary Arrangement (IVA) is the preferred option.

What is an IVA?

In Northern Ireland, England and Wales, an IVA is a formal debt arrangement that is arranged and administered by a licensed Insolvency Practitioner (IP). You will pay one lower monthly amount directly to your IP who will then distribute this amongst your creditors. IVA’s usually last between 5 and 6 years with any debt remaining after this time being written off.

Although entering an IVA is likely to mean that you will not have to pay off the total amount of your debt, it is worth remembering that it will stay on your credit record for 6 years, during which time you will find it difficult to arrange any further loans or credit, and this could continue to be the case even after that.

 Do I qualify for an IVA?

There is no legal minimum amount of debt required for an IVA, however most IVA’s are used for debts over £10,000, with a minimum monthly payment of around £100.

This is because for any debts under £10,000 the total amount paid off during the term of the IVA is likely to be similar to the total owed and so most creditors are unwilling to agree to an IVA, preferring you to pay off your entire debt, possibly through a Debt Management Plan.

There is also no maximum amount of debt that you can use an IVA for, although obviously the larger your total debt the smaller the percentage of this will be paid off at the end of your IVA. However most creditors will agree to an IVA if the likelihood is that they will get more of their debt repaid through an IVA than if you were declared bankrupt.

What debts can you include in an IVA?

An IVA can be used to service most types of debts, including both secured and unsecured debts such as; bank loans and overdrafts, credit cards, rates arrears, utility bills, store cards, personal loans and catalogue debts

There are however some debts that cannot legally be included in an IVA such as; court ordered maintenance arrears, child support arrears, magistrates courts fines and student loans.

Along with this there are some debts that can legally be included in an IVA, but generally wouldn’t be, such HMRC debts (because they want their debt paid off sooner than over the 5 or 6 years period covered by an IVA) or any loans secured against your home such as mortgages and rent arrears (as these lenders will be unwilling to write off the remaining portion of the debt).

There is no limit to the number of debts that you can include in an IVA, although normally you must have at least 3 debts to 2 different creditors. It is also worth remembering that at least 75% of your creditors by value have to agree to an IVA and so this might be more difficult to negotiate if you have a large number of smaller value debts.

It may also not always be appropriate for you to include any debts that you hold jointly with another person in an IVA. This is because the joint holder of the debt may be held liable for any debt that is left remaining after the end of the IVA. Although in some cases it may be possible to include terms for joint debts to be written off in your IVA. You are also not able to take out an IVA jointly with another person, so if you have a large amount of joint debts, then it is possible that a different debt solution may be more appropriate for you.

If you are struggling with your debts in Northern Ireland and feel that an IVA might be the right solution for you, contact the friendly team at Northern Ireland Debt Solutions today. We are licensed and accredited insolvency practitioners and will take the time to get to know you and understand your situation before advising on the right debt solution for you.

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