Last updated: 14/11/2023 | Estimated Reading Time: 4 minutes
Individual voluntary arrangements - income and asset requirements
If you are struggling to make repayments on several loans, you may want to consider setting up an individual voluntary arrangement with your creditors. IVAs allow you to lower the level of your monthly repayments and also extend the length of your loan's term. In order for you to set up an IVA you need to find yourself an insolvency practitioner, these individuals are normally accountants or lawyers with a specialised qualification that allows them to deal with insolvency.
IVAs can be a great way to lighten the financial burden that you are being placed under by your debt but it is important to be aware that they do come with a few risks that should not be overlooked lightly. You should make sure to assess the risks associated with individual voluntary arrangements before you jump head first into setting one up. It is also important to be sure that an IVA is actually the most relevant form of debt solution to you as there are some people whose situation will not be best suited to such an arrangement and who would be better off with a different debt solution.
Whilst an individual voluntary arrangement may be very appealing, not everyone who is having financial difficulty is eligible for one. There are some very specific requirements that must be met in order to be able to set up an IVA. This guide will examine and explain the asset and income specifications that you must meet in order to attain an individual voluntary arrangement.
In This Guide:
Sufficient disposable income
If you want to start an individual voluntary arrangement, you will need to make sure that you have a large enough disposable income to be able to pay back a portion of your debt each month. Generally speaking you will need to be able to provide your lenders with proof that you have at least £100 of disposable income to be able to contribute towards debt repayments. It is highly unlikely that your lenders will accept your proposal if you do not meet this minimum requirement.
If you are hovering somewhere around this level of monthly disposable income, your insolvency practitioner should be able to offer you some guidance as to what steps you can take to sufficiently increase it. If you are already on an IVA, there is always the possibility that your circumstances may change. If this happens, you may be able to change the way in which you make repayments on your plan. For example you may want to pay your lenders back with a lump sum - this may be attained by selling one or more of your assets. Again, it is advisable that you speak with your insolvency practitioner about how exactly you should go about doing this.
Individual voluntary arrangements are generally best suited to people who have a steady and reliable source of income each month. This is because these arrangements are meant as long-term debt solutions and therefore require you to make regular monthly repayments at a set amount. This means that if your income changes from month to month, you may not want to choose an IVA as a debt solution because you will not be able to properly judge whether or not you can stick to the repayment schedule.
Before you choose to set up an individual voluntary arrangement, you should have a very close look at your monthly finances so that you know exactly what sort of position you are in. Try and draw up a monthly finance plan so that you can work out exactly how much you think you can afford to pay back. You should factor in your living expenses such as your food and energy bills and then take this away from your monthly income. What you should be left with is an accurate reflection of your disposable income and therefore how much you can realistically afford to pay back each month.
Assets are defined as items that you own that have a considerable resale value, this can include things such as property or vehicles. There are no specific asset requirements in order to set up an individual voluntary arrangement but in spite of this you may find it extremely helpful to sell off some of the assets you own in order to help pay back your debt. You can do this outside of your IVA and simply use the money gained to help with your living expenses or you can do this within your IVA and use the money to contribute towards your monthly repayments.