IVA Eligibility Criteria - Do You Qualify?

IVA Eligibility Requirements

To enter an Individual Voluntary Arrangement, you must meet specific criteria. Understanding these requirements helps determine if an IVA is a viable option for your situation.

Core Eligibility Criteria

1. Minimum Debt Level

Requirement: Typically £6,000 or more in unsecured debt

Why £6,000?

  • Below this, fees make IVAs uneconomical
  • Most IPs won't accept lower amounts
  • Other solutions (DMPs) more cost-effective for smaller debts

What Counts as Unsecured Debt?

✅ Included:

  • Credit card balances
  • Personal loans
  • Overdrafts
  • Store cards
  • Payday loans
  • Catalogue debt
  • Council tax arrears
  • Utility bill arrears
  • HMRC debts (some)

❌ NOT Included:

  • Mortgages (secured on property)
  • Car finance (secured on vehicle)
  • Student loans
  • Court fines
  • Child maintenance arrears
  • Social fund loans
  • Debts obtained fraudulently

2. Regular Income

Requirement: Consistent, provable income source

Acceptable Income Sources

✅ Accepted:

  • Employment (PAYE)
  • Self-employment income
  • Pension income
  • Disability benefits (PIP, DLA)
  • Carer's allowance
  • Working tax credits
  • Child benefit (in some cases)

❌ Generally NOT Accepted:

  • Jobseeker's Allowance (JSA) only
  • Universal Credit (basic rate only)
  • Income Support only
  • Employment Support Allowance (ESA) only

Important: You can combine benefit and employment income.

Self-Employed Considerations

Self-employed individuals can get IVAs if:

  • Business has traded for 6+ months
  • Can provide accounts/tax returns
  • Income is reasonably consistent
  • Can demonstrate affordability

3. Minimum Disposable Income

Requirement: Usually £80-£100+ per month available for IVA payments

What is Disposable Income?

Formula:

Total Monthly Income
MINUS Essential Expenditure
= Disposable Income

Essential Expenditure Includes:

  • Housing costs (rent/mortgage)
  • Council tax
  • Utilities (gas, electric, water)
  • Food and housekeeping
  • Transport costs
  • Insurance (contents, life, etc.)
  • Basic clothing
  • Essential communications (phone, internet)
  • School costs
  • Childcare costs
  • Healthcare costs

Non-Essential Spending:

  • Sky TV / premium subscriptions
  • Gym memberships
  • Eating out regularly
  • Holidays
  • Luxury items
  • Excessive entertainment

Note: IPs assess whether spending is reasonable for household size and circumstances.

4. Number of Creditors

Requirement: Generally 2 or more creditors

Why Multiple Creditors?

  • IVAs are formal agreements between you and your creditors
  • With one creditor, informal arrangements often preferable
  • Fees make single-creditor IVAs inefficient

Exception:

Some IPs may accept single creditors if:

  • Debt is substantial (£15,000+)
  • Creditor is litigious
  • Alternatives have failed
  • Bankruptcy would have worse consequences

5. Residency Requirements

Requirement: Resident in England, Wales, or Northern Ireland

Geographic Restrictions

✅ IVAs Available:

  • England
  • Wales
  • Northern Ireland

❌ IVAs NOT Available:

  • Scotland (Scottish Trust Deeds instead)
  • Outside UK (other jurisdictions)

Proof of Residency:

  • Utility bills
  • Council tax bills
  • Bank statements
  • Tenancy agreement or mortgage statement

6. Age Requirements

Requirement: Must be 18 years or older

No upper age limit exists, but considerations for:

  • Under 18: Cannot enter IVA
  • Elderly: Affordability over 5-6 years must be realistic
  • Pension age: Viable if pension income sufficient

7. Creditor Approval Threshold

Requirement: 75% of voting creditors (by debt value) must approve

How Voting Works:

  • Creditors receive your proposal
  • They vote within 14 days
  • Voting power based on debt amount owed
  • Non-voters don't count

Example:

  • Total debt: £20,000
  • Creditors voting: £15,000 worth
  • Need to approve: £11,250 worth (75% of voting)

Common Reasons for Rejection:

  • Offer too low (creditors get less than bankruptcy)
  • Insufficient disposable income
  • Unrealistic budget
  • Asset values underestimated
  • Missing information

8. Employment Restrictions

Some professions have restrictions:

May Affect IVA Eligibility:

  • Certain financial services roles
  • Police officers (disclosure required)
  • Armed forces personnel
  • Some legal professions
  • Company directors (restrictions)
  • Charity trustees
  • Licensed premises managers

Action: Check your employment contract and professional body rules.

Detailed Eligibility Assessment

Debt-to-Income Ratio

While no official ratio exists, IPs typically look for:

Ideal Profile:

  • Debt: £6,000 - £75,000
  • Monthly income: £1,200+
  • Disposable income: £100-£500
  • Debt-to-income ratio: 3-5 years of income

Example 1: Good Candidate

  • Debt: £18,000
  • Income: £1,600/month
  • Expenses: £1,400/month
  • Disposable: £200/month
  • Result: ✅ Strong candidate

Example 2: Marginal Candidate

  • Debt: £8,000
  • Income: £1,100/month
  • Expenses: £1,030/month
  • Disposable: £70/month
  • Result: ⚠️ Borderline (may not be viable)

Example 3: Poor Candidate

  • Debt: £4,500
  • Income: £900/month
  • Expenses: £900/month
  • Disposable: £0/month
  • Result: ❌ Not suitable for IVA

Asset Considerations

Homeownership

Owning property doesn't disqualify you, but:

Year 5 Requirement:

  • Must attempt equity release
  • Remortgage to release equity toward IVA
  • If successful: IVA completes early
  • If unsuccessful: Extend IVA by 12 months

Equity Calculation:

Property Value: £200,000
Mortgage Owed: £160,000
Your Share: 50% (joint ownership)
Your Equity: £20,000
Amount to release: £20,000 or extend

Vehicle Ownership

Cars are generally protected if:

  • Worth less than £2,000
  • Essential for work
  • Only household vehicle
  • Disability-related need

Expensive vehicles:

  • May need to be sold
  • Replaced with cheaper alternative
  • Equity released into IVA

Other Assets

Protected:

  • Essential household furniture
  • Tools of trade
  • Items under £500 value
  • Wedding rings

May Need Sale:

  • Second properties
  • Investment portfolios
  • Valuable jewelry
  • Boats, caravans, motorcycles
  • Collectibles with significant value

Special Circumstances

Joint Debts

If you have joint debts:

Your options:

  1. Both partners enter separate IVAs
  2. You enter IVA; partner pays debt
  3. Negotiate to split debt
  4. Joint IVA (rare, complex)

Important: Co-borrower remains 100% liable even if you enter an IVA.

Business Owners

Sole Traders:

  • ✅ Can enter IVA
  • Business continues
  • Business debts included
  • Personal and business finances combined

Company Directors:

  • ⚠️ May need to resign
  • Company debts separate (not included)
  • Personal guarantees are included
  • Check articles of association

Partnerships:

  • Complex - seek specialist advice
  • Partnership debts may affect IVA
  • Other partners unaffected unless guarantors

Homemakers with No Income

If you're a homemaker:

Challenges:

  • No disposable income
  • Cannot afford IVA payments

Potential Solutions:

  • Partner contributes to payments
  • Take on part-time work
  • Consider DRO instead (if eligible)
  • Wait until returning to work

Zero-Hours Contracts

Can qualify if:

  • Average income is sufficient
  • Income relatively consistent
  • Can evidence 3-6 months income
  • Understand payments may fluctuate

IPs will:

  • Review annual reviews more carefully
  • May require higher buffer
  • Adjust payments if income drops

Seasonal Workers

Possible but challenging:

  • Need consistent off-season income
  • Partner's income may help
  • Payments based on annual average
  • More frequent reviews

IVA Eligibility Checklist

Use this checklist to assess your eligibility:

Financial Criteria

  • [ ] I have at least £6,000 in unsecured debt
  • [ ] I have regular, provable income
  • [ ] I can afford at least £80-£100 per month
  • [ ] I have 2 or more creditors
  • [ ] My disposable income is realistic
  • [ ] My debts are primarily unsecured

Personal Circumstances

  • [ ] I am 18 years or older
  • [ ] I live in England, Wales, or Northern Ireland
  • [ ] I can commit to 5-6 years of payments
  • [ ] My employment allows IVAs
  • [ ] I understand asset implications
  • [ ] I've considered alternatives

Practical Readiness

  • [ ] I can provide income proof (payslips, tax returns)
  • [ ] I can provide expenditure evidence (bills, bank statements)
  • [ ] I can list all creditors and debts
  • [ ] I'm willing to live on a strict budget
  • [ ] I understand credit impact
  • [ ] I've sought free debt advice

If you checked most boxes: You likely qualify for an IVA assessment

If you missed several: Consider alternative debt solutions

What If You Don't Qualify?

Alternative Debt Solutions

If debt is too low (under £6,000):

  • Debt Management Plan (DMP)
  • Debt consolidation loan
  • Direct negotiation with creditors

If no regular income:

  • Debt Relief Order (if debt under £30,000)
  • Bankruptcy
  • Wait until income improves

If disposable income too low:

  • Debt Relief Order (under £75 disposable income)
  • Review budget for savings
  • Increase income if possible

If you live in Scotland:

  • Scottish Trust Deed (similar to IVA)
  • Debt Arrangement Scheme (DAS)

Next Steps

1. Use Our Tools

2. Gather Documentation

Before consulting an IP, prepare:

  • Last 3-6 months of payslips or accounts
  • Bank statements (3-6 months)
  • List of all creditors with balances
  • Recent credit report
  • Bills and expenditure evidence
  • Property valuation (if homeowner)

3. Seek Professional Advice

Free Debt Advice:

  • StepChange: 0800 138 1111
  • National Debtline: 0808 808 4000
  • Citizens Advice: Local bureau
  • Money Helper: 0800 138 7777

Licensed Insolvency Practitioners:

  • Find via Gov.uk IP Locator
  • Consult 2-3 IPs before deciding
  • Compare fees and services
  • Free initial consultations

4. Make Informed Decision

  • Review all debt solution options
  • Consider long-term implications
  • Discuss with family if appropriate
  • Choose solution that fits your circumstances

Common Eligibility Questions

Q: Can I include debts in my partner's name?
A: No. Only debts in your name (or joint names) can be included.

Q: Will my partner need to enter an IVA too?
A: Only if they have their own unmanageable debts. Your IVA doesn't affect them unless debts are joint.

Q: Can I get an IVA with a CCJ or bailiff action?
A: Yes. An IVA stops most creditor actions including CCJs and bailiffs (once approved).

Q: Does bad credit prevent IVA eligibility?
A: No. Your credit score doesn't affect IVA eligibility. Income and debt levels matter most.

Q: Can I include tax debts?
A: Usually yes, including VAT, PAYE, and self-assessment arrears. HMRC is treated like other creditors.

Q: What if I've already tried to negotiate with creditors?
A: That's fine. Failed negotiations don't affect IVA eligibility.

Q: Can I enter an IVA while pregnant or on maternity leave?
A: Yes, if you meet financial criteria. Income will be reviewed when you return to work.

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