An Individual Voluntary Arrangement (IVA) is a formal agreement that helps individuals manage and reduce their debt over a set period. It is designed to offer relief to those who are struggling to meet their financial obligations. However, not everyone qualifies for an IVA. A common question is: how much debt do you need to qualify for an IVA?
Minimum Debt Requirement
There is no fixed amount of debt required by law to enter into an IVA, but most people typically need to owe at least £6,000 to £8,000 to make it worthwhile. This is because an IVA comes with fees for the FCA Regulated Debt Management Company who administers the arrangement. If your debts are lower, other options like a Debt Management Plan (DMP) or even direct negotiations with creditors might be more appropriate and cost-effective.
Types of Debt That Qualify
To be eligible for an IVA, your debt must be primarily unsecured. This includes things like:
- Credit card debt
- Personal loans
- Store cards
- Overdrafts
- Utility bills
- Tax arrears
Debts that are secured, like mortgages or car loans, generally cannot be included in an IVA, though they will be considered when assessing your overall financial situation.
Other Qualification Criteria
In addition to having sufficient debt, there are a few other key criteria to qualify for an IVA:
- Multiple creditors: An IVA is typically suited to those who owe money to more than one creditor.
- Steady income: You must have a reliable source of income to make regular monthly payments throughout the IVA.
- Insolvency: You must be in a position where you cannot reasonably repay your debts in full.
Is an IVA Right for You?
While there is a general debt threshold of around £6,000 to £8,000 for an IVA, it’s essential to speak with a licensed insolvency practitioner to fully assess your situation. They can help you understand whether an IVA is the best solution for your financial struggles or if alternative debt management options may be more suitable.