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What Are The Criteria Required To Accept An IVA?

Geoff Hibbert, 18/06/2008

Since the introduction of IVAs the IVA teams at many of the country’s top insolvency companies have dealt with over two hundred thousand IVA cases. In this time they have developed the most up to date and complex systems which can provide the exact criteria required to accept an IVA.
I the early days, when the law was new an IVA was a very simple document. To get an IVA accepted a client just showed that he was offering more that would be offered that if he or she was to go bankrupt. However with floods of applications creditors soon objected to this.
Nowadays the criteria required to accept an IVA couldn’t be more different especially because all the major banks leave the decision to accept an IVA with professional representatives of large accountancy firms such as Price Waterhouse Coopers and KPMG and in some cases ask them to block vote against any IVA proposal.
The typical IVA criteria required to accept an IVA are now the following:
• Debts greater than £15,000

• 3 or more creditors. This cannot be three debts to the same bank such as Barclaycard visa, Barclay Loan and Barclay’s overdraft. The Criteria required to accept an IVA must be separate institutions although such as Halifax and Bank of Scotland being part of the same group they are treated as separate creditors.

• Disposable income over £200 per month, assets to release or a 3rd party to contribute into the arrangement.

• You must be able to pay creditors at least 25 pence in the pound dividend. Many IVA cases fail because applicants cannot afford to make a decent monthly payment. 25p in the pound is becoming increasingly rare as an acceptable amount with most creditors looking for 30p and above.

• You should have a regular income stream. Those who have some good months and some bad months will have to make sure they can make a regular payment. Some IVA cases fail because applicant’s income is irregular or unreliable, when making an application be sure to use the amount you can rely on coming in.

• Applicants must be able to show they have allowed for reasonable necessary living expenses such food, utilities, travel costs, council tax etc. Creditors are constantly criticising those who state too much or too little for food. Some IVA cases fail because applicants spend too much on car hire purchase payments.

• The insolvency practitioner must make a positive 'Nominees Report' which portrays a professional opinion as to whether the Individual Voluntary Arrangement - IVA is a bonafide offer. He or she will decide whether the applicant is going be reliable and perform the IVA successfully.
If these criteria are met, the IVA team will explore all available debt solutions and recommend an IVA where appropriate. However, if any of these criteria cannot be met, the Company is unlikely to recommend an IVA. In these circumstances the Company may recommend an alternative solution for the debtor which would typically be debt management or debt counselling reputable debt management company.

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Geoff Hibbert is owner of
http://www.creditrepairuk.co.uk
http//www.thedebtmanagementcompany.co.uk

Source: http://www.creditrepairuk.co.uk

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