People interested in the “IVA” or “Individual Voluntary Arrangement” as a debt solutions often ask themselves questions such as “Whats’ the maximum debt level an IVA can write off?” Or “How much debt can I write off with an IVA?”
On this page we will answer that question for you and more (we recommend you read this article fully for a good understanding).
- 1 What Is The Maximum Amount Of Debt Written Off In An IVA?
- 2 How is the writing off of large debt made possible?
- 3 Why Do Creditors Agree To IVA’s?
- 4 So if I have a very large amount of debt I should qualify for an IVA?
- 5 Is An IVA The Best Option For People With Large Amounts Of Debt?
- 6 If I have large debts can I reduce monthly repayments with an IVA?
- 7 How Much Debt Do You Need For An IVA?
What Is The Maximum Amount Of Debt Written Off In An IVA?
There is no maximum debt level or “upper limit” for the amount of debt that can be written off in an IVA, meaning that if (hypothetically you had debts in excess of £250,000) there is no legal or specific reason why you cannot enter into an IVA and become debt free and have the majority of this debt written off.
How is the writing off of large debt made possible?
Since the implementation and introduction of what is known as the “Insolvency Act 1986” the IVA or “Individual Voluntary Arrangement” was introduced as a personal insolvency solution in order to offer more flexibility to the person in debt in making payments that are more realistic and to give them more say into how their personal assets are dealt with in an environment where they are in an unmanageable situation
(As opposed to bankruptcy, an IVA is seen as a favourable alternative which enables people to use their income to repay debts as opposed to liquidating personal assets & potentially losing their home).
Why Do Creditors Agree To IVA’s?
The answer to this is because if the alternative to an IVA (the debtor files for bankruptcy) were to take place, it is unlikely that the creditors themselves would receive much (if any) of the money back they lent out to the debtor in the first place, so it is in their interests from a business perspective (especially if there is no viable option) to agree to the IVA.
“Something is better than nothing” is the general principle from the perspective of the creditors.
If they can receive a portion of the debt owed to them, this is better than the debt being completely written off where it is likely they would receive nothing or next to nothing in the way of repayments.
So if I have a very large amount of debt I should qualify for an IVA?
There is no reason why not related to debt level that you should be prohibited from entering into an IVA. (no upper limits in terms of the amount of debt).
The way it usually works (in a nutshell) is there is a creditors’ meeting where all outstanding liabilities are considered and if 75% of your creditors’ agree to the new repayment terms, and the schedule and the general terms of the IVA, the IVA then looks likely to go ahead.
It is subject to the agreement of the creditors of course, but once this agreement is obtained, your creditors are then legally bound by the terms. (and the IVA is a motion that is supported by government and is considered a formal debt solution.)
Is An IVA The Best Option For People With Large Amounts Of Debt?
This is a question where to give accurate answers you would need an assessment of your existing debts, here at the homepage https://debtsolve.uk we have a contact form where you can get in touch for a free, no obligation assessment of your existing debts and suitability to see if you qualify.
Some of the primary factors relating to this question are as follows:
1) Do you have an income? You must have some form of income for an IVA due to the fact that you will be making contributory monthly repayments (remembering an IVA is not the same as bankruptcy).
2) Will the creditors’ accept the terms of the IVA? If it is a choice between having a portion of the debt repaid and having nothing it is likely there will be some kind of accord reached, but this is still subject to the creditors’ consultation and no guarantees can be made.
3) Proof: Proof of insolvency, proof of means to make the repayments and proof that you live in the UK
4) Must have 2 or more creditors.
So long as the above broad criteria are applicable there is every chance that the IVA could go through, one good way to get the process started as quickly as possible is to make contact with us for your free debt assessment to gauge your suitability for this debt solution.
For people without an income, bankruptcy would be the only option unless they are prepared or able to change their personal circumstances and earn an income (we can appreciate for some people this will not be possible, but where possible this is recommended if an individual doesn’t currently have a sustainable, regular income to meet the reduced debt repayments.)
For people who have only one creditor, an IVA wouldn’t make sense and they should either explore other options (DMP) or negotiate directly with the creditor in relation to a repayment plan (some creditors’ are surprisingly co-operative with debtors so this is an avenue worth exploring for people with low levels of debt or a single creditor).
If I have large debts can I reduce monthly repayments with an IVA?
Of course. There have been cases with IVA’s where repayments have been reduced from a total monthly payment on £40,000+ of debt, the monthly repayment being in excess of £1,100 and this has been reduced to £250 per month, and over a 5 year period the remainder of the debt had been written off, meaning more than 75% of the debt (in this case was written off as a result of the IVA being in place).
There are also scenarios’ where an even higher proportion of the debt has been written off and repayments reduced dramatically, so yes with larger debts it is highly possible (even probable) to reduce monthly outgoings, subject to the acceptance of the IVA.
How Much Debt Do You Need For An IVA?
We generally advise people to get in touch with us if they have a minimum debt level of £2,000, this is because to manage debts lower than this would not necessarily make sense for us OR the person in debt, however we find that most people have debts that are significantly larger than £2,000 which gives us a broad criteria to work with.
With a debt level of £2,000 this does not necessarily mean we would put you forward for an IVA, a debt management plan might well make a lot more sense in this scenario, it will depend on the results of the free, no obligation debt assessment we provide to all people that get in touch with us with debts’ over £2,000.
One hard and fast rule for an IVA is the number of creditors: you need a minimum of 2 creditors’ for an IVA.
If you are interested in an Individual Voluntary Arrangement or a DMP or another debt solution then feel free to get in touch for a confidential assessment of your debts on a no obligation basis.