An Individual Voluntary Arrangement (IVA) is a formal legal agreement between you and your creditors to repay a portion of your debts over 5–6 years. At the end of the arrangement, any remaining eligible debt is written off. It's one of several formal insolvency options in the UK — less severe than bankruptcy but a significant financial commitment that affects your credit file for six years. Understanding exactly what an IVA involves, and whether it's the right solution for your situation, is critical before committing.
How an IVA Works
An IVA is set up by a licensed Insolvency Practitioner (IP), who acts as your nominee and then supervisor. You make a single monthly payment to the IP, who distributes it to your creditors. The amount is based on what you can genuinely afford after essential living costs. For the IVA to proceed, creditors holding at least 75% of your total debt value must agree to it. Once approved, all creditors — including those who voted against it — are legally bound by the arrangement. A standard IVA runs for 60 months (5 years). If you own a home, you may be asked to release equity in year 5, or the arrangement can be extended to 72 months instead. At the end, any remaining debt covered by the IVA is legally written off.
- Set up and supervised by a licensed Insolvency Practitioner
- 75% of creditors (by debt value) must vote to approve
- Single monthly payment based on disposable income
- Typically 60 months; homeowners may extend to 72 months
- Remaining eligible debt written off at end of term
Who Qualifies for an IVA?
An IVA is generally suitable if you have at least £6,000–£10,000 in unsecured debt across multiple creditors, have a regular income, and can afford a reasonable monthly payment (typically £100/month or more). It's designed for people who cannot realistically repay their full debt but can repay a meaningful proportion. It's usually not appropriate if you're self-employed with complex business finances (a business IVA exists separately), or if your debts are predominantly secured (mortgage) or non-dischargeable (child maintenance, student loans, court fines). A free debt adviser can help assess whether an IVA is the right fit.
- Typically need £6,000–£10,000+ in unsecured debt
- Need regular income to make monthly payments
- Usually minimum £100/month disposable income
- Not suitable for: mainly secured debts, complex business situations
- Not suitable for: if bankruptcy would result in a faster, cleaner resolution
IVA Costs and Fees
IVA fees are significant but come from your monthly contributions — you don't pay them directly out of pocket. The Insolvency Practitioner charges a nominee fee (for setting up the IVA, typically £1,000–£2,000) and ongoing supervisor fees (often 15–20% of funds distributed to creditors). These are agreed in the proposal that goes to creditors, who vote knowing the fees will come from the pot. This means creditors receive less than you pay in — which is partly why creditors sometimes reject IVAs if they believe they could recover more through bankruptcy. Always make sure you get a clear fee breakdown from any IP before proceeding.
- Nominee fee: ~£1,000–£2,000 (upfront setup cost)
- Supervisor fee: ~15–20% of funds distributed
- Fees come from your monthly contributions, not additional payments
- Creditors receive the remainder after fees
- Compare: free debt advice organisations (StepChange, CAB) can help you find reputable IPs
How an IVA Affects Your Life
An IVA appears on the Insolvency Register (public record) during the arrangement and for three months after. It remains on your credit file for six years from the start date, making new credit — mortgages, car finance, credit cards — very difficult or expensive during this period. Your income and expenditure are monitored annually — if you get a pay rise, windfall, or inheritance, you may be required to pay more into the IVA. If your financial situation worsens significantly, you must inform your IP. If you fail to maintain payments and creditors don't agree to modify terms, the IVA can fail, potentially leading to bankruptcy. Some professions (e.g., accountancy, financial services, law) prohibit IVAs — check your employment contract.
- 6-year impact on credit file
- Listed on the public Insolvency Register
- Annual reviews — windfalls and pay rises may increase payments
- Some employers and professions restrict IVA holders
- Failed IVA can result in creditors petitioning for bankruptcy
IVA vs. Other Debt Solutions
Before committing to an IVA, compare it against alternatives. A Debt Management Plan (DMP) is informal, doesn't write off debt, but has less credit impact and more flexibility. Bankruptcy is more severe but faster — debts discharged in 12 months typically. A Debt Relief Order (DRO) is available if you have minimal assets and income under £75/month disposable — much simpler and cheaper than an IVA. A Debt Consolidation Loan reduces interest and simplifies payments but doesn't reduce the total owed. The right solution depends on your income, assets, debt level, and how quickly you want to resolve the situation. Always get free, independent advice from StepChange, National Debtline, or Citizens Advice before committing.
- DMP: informal, flexible, no debt write-off, less credit impact
- Bankruptcy: faster resolution (12 months), more severe restrictions
- DRO: simple, cheap — but only for minimal income/assets situations
- Debt consolidation: no debt reduction, requires good credit
- Always take free debt advice before choosing a formal solution
Frequently Asked Questions
Can I get a mortgage after an IVA?
Yes, but typically not until 3–6 years after the IVA completes and your credit file has started to recover. Specialist mortgage lenders exist for those with IVAs, but rates are higher.
What happens if I miss IVA payments?
Missing payments is serious. Your IP may be able to agree a short payment break, but persistent missed payments can cause the IVA to fail, leading to bankruptcy.
Does an IVA affect my partner?
Not directly — your partner's credit file is unaffected unless you have joint debts or joint financial products.
Are all debts included in an IVA?
Only unsecured debts can be included. Mortgages, secured loans, student loans, child maintenance, and court fines are excluded.
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