Debts included in an IVA

What debt can be included in an IVA?

Individual Voluntary Agreements (IVAs) are a very popular alternative to Bankruptcy, allowing individuals who are in financial difficulties, to repay affordable monthly amounts to their creditors over a term of usually 5 years. Once this time is up, any outstanding debt will be cleared.

However, it is important to understand what can be included in an IVA as not all debt is eligible.

Criteria of an IVA

In order to be qualify for an IVA, an individual must have no less than £12,000 of unsecured debt and be insolvent (ie their income is no longer enough to cover essential living expenses and debt repayments). Furthermore, they usually are required to have a monthly income that will cover the cost of all essential living expenses, with enough left over to be able to repay creditors for the duration of the IVA. The employed (either full or part time), self employed and those receiving disability benefits will all be considered, however those on income support will usually be declined an IVA as they are unable to guarantee their monthly income.

Eligible Debt

The following types of debt may be included in an IVA:

• Most unsecured debt such as; Credit cards, bank loans and overdrafts
• Outstanding utility bills from previous properties
• Store cards
• Tax bills
• Loans from family and friends
• Any owed shortfall on HP agreements for items no longer required (as the lender will repossess the items).

Debt that can't generally be included

The following types of debt may not be included in an IVA:

• Any form of secured loans
• Mortgage
• HP on goods still needed (for example a car - as the HP lender will simply repossess the item if payments fail)
• Student loans
• Outstanding parking fines
• Maintenance and child support
• Court fines
• Gambling debt

IVAs are often the preferred option for homeowners as mortgage payments are taken into consideration when calculating the monthly repayments in an IVA, and therefore providing repayments are maintained, there is no need to sell the house. If the potential applicant is a tenant and renting a property, it may be that Bankruptcy would be the preferred option. In either case, it is vital that advice is sought from either a charitable organisation, such as the Citizens Advice Bureau (CAB), or a licensed Insolvency Practitioner (IP).