What Is the Minimum Debt for an IVA?

No Strict Legal Minimum

The Insolvency Act 1986 does not set a minimum level of debt for an IVA. In theory, an IVA could be set up for any amount. However, in practice, most Insolvency Practitioners require a minimum of around £6,000 to £10,000 in unsecured debt to make an IVA viable and cost-effective.

Why Is There a Practical Minimum?

The reason for the practical minimum is the cost structure of an IVA. The IP's fees (nominee fee and supervisor fee) are paid from your monthly contributions — before creditors receive anything. If the total debt is very small, the IP's fees might consume a disproportionate share of the repayments, leaving very little for creditors. In that scenario, creditors would be unlikely to vote for the IVA.

Two or More Creditors Required

Alongside the debt amount, you must owe money to at least two separate creditors. An IVA is a collective arrangement — there is no mechanism for a single creditor IVA (a single creditor arrangement is typically handled by a direct payment plan instead).

What If My Debts Are Below £6,000?

If your unsecured debts are below £6,000, alternatives that may be more suitable include:

• Debt Management Plan (DMP) — informal, repays debts in full at a reduced rate. Free through StepChange or similar charities.
• Debt Relief Order (DRO) — if you have debts under £30,000, limited assets, and low income, a DRO costs just £90 and writes debts off after 12 months.
• Direct negotiation — for smaller debts, negotiating directly with creditors (or through a free debt charity) may be sufficient.