Individual Voluntary Arrangements (IVAs)

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your unsecured creditors — such as credit card companies, banks, and personal loan lenders — to repay a portion of your debts over a fixed term, typically five years. At the end of the IVA, any unsecured debt included in the arrangement that has not been repaid is legally written off.

IVAs are governed by the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. They are overseen by a licensed insolvency practitioner (IP), who acts as the supervisor of the arrangement. The IP assesses your income, outgoings, assets, and debts, then drafts an IVA proposal setting out what you can afford to pay each month and the terms under which creditors will accept the arrangement.

Your monthly payment is calculated on the basis of your surplus income — what is left after essential living expenses. This is reviewed annually throughout the IVA, and payments can rise or fall if your circumstances change. If you receive a windfall (inheritance, bonus, or tax refund) during the IVA, you may be required to pay a proportion of it into the arrangement.

At the end of the five-year term, the IP issues a completion certificate confirming that the IVA has been successfully concluded. Your remaining included debts are then discharged, and the arrangement is removed from the Insolvency Register (though it remains on your credit file for six years from the date the IVA started).

An IVA does not automatically bind your creditors. For it to proceed, it must be approved at a creditors' meeting (which is now typically a virtual or deemed consent process). Creditors holding at least 75% of the total value of the debt included in the IVA proposal must vote in favour. If this threshold is met, the IVA is approved and becomes legally binding on all creditors included in it — even those who voted against.

Creditors can propose modifications to the IVA terms before voting — for example, requiring you to try to release equity from your home in year four or five, or requiring higher monthly payments. Your IP will advise whether proposed modifications are acceptable. You can reject modifications and let the IVA fail, or accept them and proceed.

If the 75% threshold is not reached, the IVA fails. Your IP may renegotiate and re-submit the proposal, or you may need to consider alternative debt solutions such as bankruptcy or a Debt Relief Order.

Before entering an IVA, it is important to understand the significant consequences:

• Credit file: The IVA is recorded on your credit file for six years from the start date, significantly affecting your ability to obtain credit, mortgages, or favourable interest rates during that period.
• Insolvency Register: Your IVA will appear on the public Individual Insolvency Register maintained by the Insolvency Service for the duration of the arrangement plus three months after it ends.
• Property: If you own a home with equity, you will usually be required to try to remortgage or release equity towards the end of the IVA. If you cannot do so, the IVA term is typically extended by 12 months instead.
• Employment: Some professions (such as solicitors, accountants, and financial advisers) may face restrictions if you enter formal insolvency. Check your employment contract and professional regulatory body.
• Ongoing obligations: You must keep up monthly payments, notify your IP of any change in circumstances, and cooperate fully throughout. Failure to do so can result in the IVA being terminated and you being made bankrupt.

Always take free, independent debt advice before signing up to a fee-charging IVA provider. StepChange, National Debtline, and Citizens Advice can give impartial guidance on whether an IVA is the best solution for your situation.

An IVA is not the right solution for everyone. Depending on your total debt, income, assets, and circumstances, alternatives may be more appropriate:

• Debt Relief Order (DRO): For debts under £30,000, surplus income under £75/month, and assets under £2,000 — a faster, cheaper alternative to bankruptcy or an IVA. Suitable for those with few assets and low income.
• Bankruptcy: If your debts are unmanageable and an IVA is unlikely to be approved or sustained, bankruptcy offers a clean break after 12 months. The application fee is £680. It carries similar consequences to an IVA but may be more appropriate in some circumstances.
• Debt Management Plan (DMP): An informal arrangement with creditors to repay debts at a reduced rate. Not legally binding on creditors, but can be set up free of charge through StepChange or National Debtline. No impact on the Insolvency Register.
• Breathing Space: A 60-day legal pause on enforcement action while you seek debt advice. Not a debt solution, but can give you time to assess your options without creditor pressure.