How To Apply For An IVA

If you are thinking that you want to apply for an IVA, you will more than likely be struggling with some form of debt and want an IVA plan setting up.

To apply for an IVA, the first thing you should do is speak to a professional debt advisor on the solutions available to you and to ensure an IVA is the best plan forward.

Where Can I Start My IVA Application?

There are a number of IVA companies out there who will happily speak to you and see if it is a suitable option for you. All you have to do is google ‘Setup an IVA’ and a number of IVA sites will appear. There are also charity debt companies such as the debt foundation.

Below is a list of some reputable sites you can make an IVA application through :

The initial advice is free and will provide you with a good understanding on whether an IVA is right for you. This will typically take 20 – 30 minutes. You will want to ensure you can consistently afford the monthly payment into an IVA during the course of the 5/6 year plan. You will be under no obligation to proceed if you don’t feel it is the correct debt solution for you. It is an informal chat and all conversations should be kept confidential.

To have an understanding of your financial situation, you will need to provide information on your income and monthly outgoings and the outstanding balances on your debts. This will allow a debt advisor to build up a financial picture and asses your affordability towards an IVA. Once done they will either confirm an IVA as appropriate or offer alternative solutions.

Do I Qualify For An IVA

To Qualify for an IVA you will typically need to:

  • Be struggling with your current unsecured debts
  • Have more than £6,000 of unsecured debt
  • Be able to afford £100 or more towards your IVA
  • Have 2 or more creditors

If you feel an IVA is the solution for you and you have provided all the necessary information an Insolvency Practitioner will draft a proposal and present it to your creditors at a creditors meeting. This proposal will demonstrate your affordability to pay back your debts and return to creditors.

How An IVA Works

To be accepted for an IVA, at least 75% of your creditors who vote will have to accept the proposal. Once 75% or more have accepted, all creditors will have to accept the IVA proposal even if some of your creditors originally objected the proposal.

Following the creditors meeting, provided its been approved, the IVA comes into effect and you will start paying back your debts in monthly instalments. Your Insolvency Practitioner will act as the supervisor to the IVA and distribute your monthly payments to your creditors.

At the end of your 5/6 years, any remaining balance on your debts will be written off. You will be provided will all the information on how long your IVA will last, how much your monthly payments will be, how much will be written off, the fees involved etc before you begin your IVA plan.

You should note an IVA is a formal debt plan and breaking the agreement will have a negative impact on your financial situation and could lead to bankruptcy.

9 Main Differences Of An IVA vs DMP

In short, the main differences between an IVA vs a DMP is that an IVA is a formal solution that both you and your creditors must stick to, usually over 5 years. A DMP is an informal debt solution meaning neither yourself nor your creditors are obliged to stick to the plan.

Both plans have many more differences and their own pros and cons. In this article we will help explain the differences between both plans and that will hopefully help you understand which solution is better for you. Below are the main differences between an IVA and a Debt Management Plan.

An IVA like a Debt Management Plan allows you to consolidate your unsecured debts into one affordable monthly payment which will then be distributed amongst your creditors. Your monthly payment will be determined by examining your affordability through your income/expenditure.

1. Creditor Protection

An IVA is administered by an Insolvency Practitioner who will work on your behalf to find a repayment scheme to pay back your creditors. With an IVA you are protected from your creditors who are no longer allowed to hassle/chase you for your debt. Your creditors will no longer be allowed to charge you anymore interest and charges.

With a DMP, a request is made to your creditors to freeze interest and charges which they are not obliged to accept. Usually, creditors will accept this request for a set period (6 months) whereby a new request will have to be put forward.

2. Length Of Plan

With a Debt Management Plan, this will continue until either your debts are paid off or you or your creditors terminate the plan. They tend to last longer than an IVA as there is no debt being written off with a DMP. A reputable debt firm will provide you with an estimation of when the DMP will finish – subject to interest and charges being frozen

An IVA will usually last 5 years, possibly 6. You will know at the start of an IVA how much you will need to pay into your IVA each month and when the plan will finish.

3. DMP payments are flexible, IVA payments are not

With a DMP, your monthly payments are flexible, so if your working hours drop or your expenses unexpectedly increase, you can adjust you monthly payment so that it remains affordable. This will make your DMP last longer and decreasing your monthly payment should only be considered if you are genuinely struggling. Conversely, if your income increases and your disposable income increases you can pay more into your debt management plan.

With an IVA, your payment is fixed from month one. If you do have some financial struggles during your IVA there may be an option to decrease your payments slightly or have a 9 month payment holiday. Generally, an IVA would fail if you cannot maintain the monthly payment agreed. If an IVA fails, you will be back to square one and may be forced to consider bankruptcy

4. Debts Written Off With An IVA

This is the one most of you will want to know – how much debt can be written off? The frustrating answer is, its depends on an individual’s circumstances. At the end of an IVA, any remaining unsecured debts will be written off. This can be as much at 80% written off in some extreme cases. With a DMP, none of your debts will be written off and your debt plan will finish once your debts have been paid off.

5. IVA & DMP Fees

An IVA will generally be more expensive to setup however the fees will be incorporated into your monthly payment, just like in a DMP so you won’t be receiving additional bills on top of your monthly payment.

6. Running The Plan

An IVA needs to be administered by a licensed insolvency practitioner, which is why the fees for an IVA tend to be higher. You will have to go via a professional debt company or a debt charity such as stepchange to start your IVA application. A Debt Management Plan can be run by a debt management company or by yourself. There are also debt charities which can help setup you debt management plan without charging a fee . If you want to go down the route of managing it yourself, there are some free templated letters you can download at the National Debt Line

7. IVA Creditor Meeting

An IVA is subject to a creditor meeting whereby the majority of your creditors have to agree. There is no creditors meeting with a DMP

For an IVA to be approved, 75% by the value of your debt of creditors who vote at the meeting have to agree. If you have one creditor who you owe a large sum to, they have the power to veto the IVA. Your insolvency practitioner should have enough experience to know which creditors will be difficult and will discuss this with you if he thinks they may be problematic.

For a DMP, each creditor is proposed individually. Even if one of your creditors rejects the proposal, it is still possible to continue with the DMP whilst negotiations continue with the tricky creditor. Not every creditor may agree to freeze interest and charges.

8. Your Credit Rating After AN IVA AND A DMP

Both solutions are highly likely to have an effect on your credit rating. If you are behind with debt repayments, it is likely your credit rating has already been damaged and your ability to borrow money will be low.

An IVA will affect your credit rating more seriously compared to a DMP. It will be very difficult to borrow money when on an IVA. The mark on your credit rating will last for the duration of your IVA.

Being on a DMP is will certainly affect your credit score. This is because you will be paying less than the minimum repayment agreed when you took out the debt. You may be required to remortgage or release equity during your IVA

9. Public Details

Anyone who enters an IVA will have their details published onto a public database called the insolvency register. With a DMP, your details are kept confidential

Am I Eligible for an IVA or a DMP?

The criteria for an IVA is slightly more strict than for a DMP. To qualify for an IVA you must :

  • Have over £5,000 of unsecured debt
  • Be able to afford at least £100 per month towards your debts
  • Live in UK (but not Scotland)
  • Owe to two or more creditors.

The criteria for a DMP is more subjective to the company you apply to. As a general rule of thumb, to qualify for a DMP you must have:

  • Over £3,000 of unsecured debt
  • Be able to afford at least £80 per month, some company’s may go as low as £60 per month
  • Live in the UK
  • Owe to two or more creditors