Other than bankruptcy, An IVA is the only Debt Consolidation solution which legally writes off a proportion of debt; as such creditors will only accept a proposal if they believe it to be in their best interests to do so.
Minimum values for an IVA are generally £10,000 of debt where the current repayment levels are unaffordable, and the ability to repay at least £150 per month so that the creditors get back all least 30% of the debt.
However, more importantly, creditors need to be confident this is your best attempt to repay as much of your debt as can reasonably be expected. An IVA is only a debt solution for those with serious debt problems who show a desire to pay back as much as possible to their creditors.
Below outlines the elements contributing to a successful IVA proposal.
The Nominee
The first step in getting an IVA is to find an Insolvency practitioner (IP) willing to act as nominee. We employee IPs who will access your situation and if an they consider an IVA to be the right debt consolidation choice for you, they will produce the IVA proposal. In order for your IVA to be “passed” 75% of the creditors by amount of debts must approve it.
You Must be Insolvent
In simplistic terms, being insolvent means you are not able to repay debts on time, and that the total owed is more than your available assets. An IVA is not possible for debt consolidation should your personal wealth total more than your debts. For example, if the equity in your property significantly outweighs your debts, then could repay your debts in full by selling your home, by a secured debt consolidation loan, or a debt consolidation remortgage. Your loan and credit card companies would not agreed to forgive any debt if this were the case.
Amount of Debt and Number Of Creditors
Debt soultion by means of an IVA requires that you owe more than £10,000 to creditors (minimum three lines of credit from two or more creditors) and are able to afford at least £150 per month towards your debts.
Country Of Residence.
Anyone looking to consolidate debt with an IVA must be resident of England, Wales or Northern Ireland. IVAs are not available for Scottish residents, where there is an alternative available called a Trust Deed.
Better, or at least no worse return than bankruptcy.
An IVA must offer a higher return to creditors than could otherwise be expected were the applicant to be made bankrupt. The advantage of an IVA for creditors is that their own costs are lower as they normally receive payments from income for 60 months.
IVA payments must be affordable.
Loan and credit card companies must to be confident that you can keep up the debt consolidation payments for the duration of the agreement. The future is known, it is important that from the start, you can show:-
- A reasonably stable and ongoing income.
- Affordability of basic family needs while not living in poverty.
- That your expenditure is not deemed excessive and you are showing desire to repay creditors as much as you can reasonably afford.
- Recent periods of unemployment, working through a probationary period in a new job or self-employment without proper accounts are factors which can prejudice an IVA application.
Proof Of Circumstances
An honest declaration of assets and/or anticipated future earnings should be made. Material or false declarations are likely to result failure of the IVA application and may prejudice future applications. An IVA proposal is a legal document so the applicant must provide suitable evidence to support the proposal such as:-
- Latest bank statement to confirm current payments.
- Latest statements for all unsecured credit such as credit cards, store cards, catalogues etc.
- Mortgage statement or tenancy agreement to prove stated outgoings
- Recent Pay slips
- Current council tax bill. Include details of arrears if applicable.
- Proof of identification
- Award letters for all state benefits currently being received
- HP agreements
- Secured loan agreements