Qualifying For An Iva

An IVA is a legally binding agreement between the debtor and their creditors

, where the debtor agrees to pay an affordable monthly sum into the IVA in order to clear their debts. The monthly sum paid into the Individual Voluntary Arrangement is based on the debtor's income and expenditures. However, the debtor must comply with several strict criteria in order to apply for an Individual Voluntary Arrangement:

The debtor must have unsecured debts of over 15,000 owed to at least three creditors The debtor or their partner must have a regular source of income originating from regular employment If the debtor is a homeowner, his mortgage payments will be taken into account as expenditure costs. If the debtor's personal circumstances happen to change during the IVA, the Insolvency Practioner will act on the debtor's behalf and submit a revised offer to the creditors.

An IVA takes effect once the creditors have agreed on the terms of the proposal submitted by the Insolvency Practitioner. The proposal is approved during the creditors meeting when it is submitted to the creditors' vote. If more than 75% of the creditors in value vote (in person or by proxy) in favour of the proposal, the IVA is approved. However, if any of those voting are associates (business associates, friends or family), a second count takes place during which 50% of non-associated creditors must vote in favour of the IVA proposal for it to be approved. If the debtor's personal circumstances happen to change, a new proposal will have to be submitted to creditors for them to vote on and approve. Once the Individual Voluntary Agreement has been accepted, all charges and interest rates are frozen.

In the case of the debtor being unable to make their monthly repayments, it is more than likely that they will go bankrupt if no new terms can be found in order to carry on with the IVA. However, an IVA and Bankruptcy are not mutually exclusive. A person can propose an Individual Voluntary Agreement after they have been made bankrupt. What's more, if an arrangement is agreed post-bankruptcy, then the debtor can apply to the court for the annulment of the Bankruptcy Order.

It then becomes possible to nominate an Official Receiver to supervise the arrangement. This type of arrangement is called a Fast Track Voluntary Arrangement and is only suitable in certain cases.

by: Timothy Taylor

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