An Individual Voluntary Agreement (IVA) is one of several solutions aimed at those who have found
themselves struggling to pay back debt. Generally, individuals are required to have at least £12,000
of unsecured debt, and are insolvent (ie their essential expenditures and debt repayments are more
than their monthly income).
IVA Approval Process
In order for an IVA to be approved, a licensed Insolvency Practitioner (IP) will first assess the
debtor’s finances to establish an affordable monthly amount that could be repaid to the creditors.
This will take into account all essential expenditure, and so rent/mortgage payments, bills and food
will all still be affordable. This information is then presented to the creditors involved who will
then vote on whether or not they agree to the terms of the IVA. In most cases, creditors of at least
75% of the value of the debt must agree in order for the application to be successful. As at the end
of the IVA term, which is usually 5 years, any outstanding debt will be cleared, creditors will only
agree to an IVA if they feel that the total amount of money they will get back is more than if the
individual declared themselves bankrupt.
IVA and Income Support
As an IVA is a legally binding agreement, applicants must be able to demonstrate that they can maintain
the agreed monthly repayments, as failing to do so could result in a failure of the IVA and the creditors
may then petition for bankruptcy. Therefore, an individual on Income Support is often unlikely to be
eligible for an IVA, as income support is often means tested and may barely cover essential expenses as
it is. Furthermore, there may be a change of circumstances resulting in income support ceasing. As a
result, it would be too much of a risk for the creditors to take on.
It may be, in the event of an individual finding themselves struggling with debt repayments who are on Income
Support, that Bankruptcy may be a more suited option. There is usually an initial fee of £700, which is made
up of court and administration fee. The advantage of Bankruptcy nowadays is that it usually only lasts for
12 months, although it will remain on the credit record for 6 years. On the other hand, obtaining further
credit may be difficult as a result.
For anyone who is struggling with debt and on income support, it is important to seek advice on the best
solution. There are a number of charitable organisations that may be able to help that do not charge a
fee, such as the National Debtline, the Citizens Advice Bureau (CAB) or the Consumer Credit Counselling
Service (CCCS) to name a few.