Is there a minimum debt for an IVA?
Short answer
No — there is no statutory minimum. What matters is whether creditors holding 75% by value of the debt vote in favour, and whether you have enough surplus income to sustain payments for about five years. The court does not approve an IVA; creditors do.
An IVA is a formal, legally binding agreement with your unsecured creditors, governed by the Insolvency Act 1986 and set up by a licensed insolvency practitioner. No statute sets a floor on the debt, and no court signs it off. What decides it is arithmetic and a vote.
The 75% test
Your insolvency practitioner assesses income, outgoings, assets and debts, then drafts a proposal setting out what you can afford each month. Creditors vote on it — usually by deemed consent or a virtual meeting — and it is approved if those holding at least 75% by value of the included debt vote in favour. Once that threshold is met the arrangement binds every included creditor, including those who voted against. Fall short and the IVA fails; the practitioner may renegotiate and re-propose, or you may need to look at bankruptcy or a debt relief order instead.
Creditors can attach modifications before voting — commonly a requirement to try releasing equity from your home in year four or five, or higher monthly payments. You can accept them or let the proposal fall.
What living with one involves
- Five years is the usual term, with the balance written off at the end and a completion certificate issued.
- Payments are based on surplus income and reviewed annually, so they can rise or fall. A windfall — inheritance, bonus, tax refund — may have to be paid in wholly or partly.
- Homeowners are typically expected to attempt to release equity late in the term; where that is impossible the IVA is usually extended by 12 months instead.
- Fees are taken from your monthly payments rather than charged upfront — a nominee fee for setting it up and a supervisor fee for running it. Ask what proportion of each payment actually reaches creditors.
- It appears on your credit file for six years from the start date and on the public Individual Insolvency Register for the duration plus three months.
Only unsecured debts go in. Mortgages, hire purchase, student loans, child maintenance arrears and certain court fines stay outside and must be paid alongside. Some regulated professions restrict people in formal insolvency, so check your contract and professional body first.
If you cannot maintain payments, contact the practitioner immediately — terms can often be varied where circumstances have genuinely changed. A terminated IVA releases every creditor to pursue the full original debt, and the practitioner may petition for your bankruptcy. Take free advice from StepChange, National Debtline or Citizens Advice before signing anything with a fee-charging provider.
Related guides
Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) is a formal insolvency process that lets you reach a legally binding agreement with your creditors to pay back what you can afford over a fixed period — typically five years. At the end of the arrangement, any remaining debt covered by the IVA is written off.
6 min
Debt Relief Orders
A Debt Relief Order (DRO) is a formal insolvency solution for people with relatively low levels of debt, minimal assets, and very low surplus income. When a DRO is granted, you enter a 12-month moratorium during which creditors cannot take action against you and interest is frozen. At the end of the 12 months, your qualifying debts are written off completely. A DRO can be a powerful fresh start — but it comes with conditions and restrictions.
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Bankruptcy in the UK: The Basics
Bankruptcy is a formal insolvency process that can clear most of your unmanageable debts and give you a fresh financial start. In England and Wales, you apply online to the Insolvency Service, pay a £680 fee, and — if the application succeeds — are automatically discharged from most debts after 12 months.
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Debt Management Plans (DMPs)
A debt management plan (DMP) is an informal agreement between you and your creditors, arranged through a debt advice organisation, to repay your unsecured debts at a rate you can realistically afford. Unlike formal insolvency options such as bankruptcy or an IVA, a DMP is not legally binding and does not involve the courts. Used correctly — and always through a free provider — a DMP can give you a structured path out of debt without the legal consequences of formal insolvency.
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