Could I qualify for an IVA if I'm claiming benefits?

Yes, it is possible to qualify for an IVA if you're claiming benefits, as long as you can afford to put a reasonable amount towards your unsecured debts every month - and as long as the 'owners' of 75% of your unsecured debt agree to it.

People who claim benefits to top up their income, like working tax credits, child benefits, or housing benefit, could well have a reasonable amount of disposable income.

However, people living off benefits alone are unlikely to qualify for an IVA - because they are likely to have a low disposable income.

An IVA is a form of insolvency for people who can no longer afford their repayments but can afford to contribute a monthly amount that their lenders find acceptable. If you're 'living on benefits', it's unlikely you could do that - but there are alternatives.

Click here to find out whether you could qualify for an IVA.

Alternatives to an IVA

If you're claiming benefits, we could still help you to manage your debts if you're struggling. Speak to one of our advisers to discuss your options. You could, for example, delay starting a debt solution if your situation is only temporary, and then apply for one later on if you still needed it.

If you're in debt and you're on a low income, bankruptcy or a Debt Relief Order (DRO) might be more suitable.

A DRO is basically a cheaper alternative to bankruptcy and doesn't involve going to court, but there are strict rules about who can apply for one because it is designed to help people in a particular situation.

To qualify for a DRO, your unsecured debt must not exceed £15,000, your disposable income must not exceed £50 per month and your assets mustn't exceed £300 in value (although you can own a car worth up to £1,000).

A DRO is similar to bankruptcy, but it only costs £90 to apply (bankruptcy can cost £700 up front). A DRO freezes all unsecured debt for 12 months and writes it off at the end, if your circumstances haven't improved. Bankruptcy could also write off debts after one year and there is no limit to the amount of debt that could be written off - but it will require you to make monthly payments if you can afford them.

Click here to see the differences between IVA and Bankruptcy.

Any kind of insolvency has consequences, such as damage to your credit record for six years. Other financial restrictions could apply for longer - and insolvencies do appear in the Individual Insolvency Register, which is publicly available.

Our team of debt experts could help you to decide what to do next if you're struggling in debt and on benefits. You can call us on 0800 970 7725 or fill in the form on this page to see if you could qualify for an IVA.

By Lucy Bower.