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An Individual Voluntary Arrangement (IVA) is a legally binding agreement under the Insolvency Act 1986 between you and your creditors to repay a portion of your debt over a set period, typically five to six years. At the end of the term, any remaining debt is legally written off. If you’re struggling with debts of £5,000 or more, an IVA could help you become debt-free while protecting your home and stopping creditor harassment.

We provide free, independent advice from licensed Insolvency Practitioners who assess your situation and explain all your options under current UK insolvency regulations. Whether an IVA is right for you or not, we’ll give you honest guidance to help you take control of your finances.

How Does an IVA Work?

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An IVA follows a straightforward process managed by a licensed Insolvency Practitioner on your behalf:

1. Assessment: An Insolvency Practitioner reviews your debts, income, and essential expenses to calculate what you can realistically afford to pay each month.

2. Proposal: Your IP prepares a formal proposal under the IVA Protocol and submits it to all your creditors, explaining what you’ll pay and over how long.

3. Creditor Approval: At least 75% of your voting creditors (by debt value) must approve the proposal. Most properly prepared proposals are approved because creditors receive more than they would through bankruptcy.

4. Legal Protection: Once approved, the IVA becomes legally binding. All interest and charges freeze immediately. Creditors must stop contacting you and cannot take legal action.

5. Completion: You make one affordable monthly payment for 5-6 years. Your IP distributes the funds to creditors. At the end of the term, remaining debt is written off.

Throughout the process, your Insolvency Practitioner handles all negotiations and creditor contact. You simply make your monthly payment and attend annual reviews to ensure payments remain affordable.

Learn more about how IVAs work →

Do You Qualify for an IVA?

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To qualify for an IVA, you typically need to meet these criteria:

• £5,000+ unsecured debt owed to two or more creditors
• Regular income from employment, self-employment, or benefits
• £80-£100+ per month available after essential living costs
• Unable to pay debts in full within a reasonable timeframe

If you’re facing constant creditor calls, bailiff action, or threats of court proceedings, an IVA provides immediate legal protection. Your debts can include credit cards, personal loans, overdrafts, payday loans, council tax arrears, and debts with debt collectors like Lowell, Cabot, or PRA Group.

An IVA isn’t suitable if your income is very low or irregular, if you can afford to repay your debts through a standard repayment plan, or if you work in certain professions (police, armed forces, some financial services roles) where insolvency restrictions apply.

Not sure if an IVA is right for you? Read our guide: Is an IVA Suitable for Me?

What Debts Can an IVA Include?

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An IVA must include all your unsecured debts. The most common include:

Debts that CAN go into an IVA:

• Credit cards and store cards
• Personal loans and overdrafts
• Payday loans and catalogue debts
• HMRC debts (tax credit overpayments, self-assessment tax)
• Council tax arrears
• CCJ debts and County Court judgments
• Utility bill arrears (gas, electric, water)
• Debts with debt collectors and bailiffs

Debts that CANNOT go into an IVA:

• Secured loans and mortgages (unless you’ve left the property)
• Hire purchase or car finance agreements
• Court fines and magistrates’ fines
• Student loans
• Child maintenance arrears
• TV licence fines
• Parking penalty charges (in most cases)

If you’re being chased by multiple debt collection agencies or have received letters from bailiff companies, an IVA can include all those debts and stop the harassment immediately. For specific debt types, see our guides on credit card debt management, council tax problems, and dealing with bailiffs.

IVA Advantages and Disadvantages

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An IVA has significant benefits but also real drawbacks. Here’s the honest picture:

Advantages

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Debt write-off: Most people write off 60-70% of their debt after completing an IVA. If you owe £20,000 and pay £120/month for 5 years, you’ll pay £7,200 total and have £12,800 written off.

Creditor contact stops: Once approved, all creditor harassment ends immediately. No more calls, letters, or doorstep visits. Your IP deals with them.

Interest and charges freeze: Every penny you pay goes towards clearing your debt, not feeding interest charges.

Keep your home: You won’t be forced to sell. If you have equity, you may be asked to try remortgaging in year 5, but if that’s not possible, your IVA extends by 12 months.

One affordable payment: Based on what you can genuinely afford after essential costs, typically starting from £80-£100 per month.

Disadvantages

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Credit file damage: An IVA stays on your credit file for 6 years, making borrowing difficult during that time.

Borrowing restrictions: You can’t take out credit over £500 without your IP’s permission for the entire duration.

Windfalls claimed: Inheritances, bonuses, PPI refunds over £500 must go towards your debt.

Failure rate: Around 1 in 3 IVAs fail, usually due to lost income or changed circumstances. If your IVA fails, creditors can chase you for the full original debt.

5-6 year commitment: That’s a long time living on a restricted budget with annual financial reviews.

Public record: Your details appear on the Individual Insolvency Register (though it’s not advertised).

For a complete breakdown of what life with an IVA actually looks like, including real budgets and failure scenarios, read our detailed guide: IVA Pros and Cons

How Much Does an IVA Cost?

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IVA fees come from your monthly payments, not as extra charges. Here’s what you’ll typically pay:

Nominee Fee: £1,000-£2,000 for preparing your proposal and negotiating with creditors.

Supervisor Fee: 15-20% of your total payments for managing the IVA over 5-6 years, collecting payments, and handling annual reviews.

Disbursements: £500-£1,000 for admin costs, postage, and legal notices.

Total typical cost: £3,650-£3,950 over the life of the IVA.

These fees are built into your affordable monthly payment. You don’t pay anything upfront. If you pay £120/month for 60 months (£7,200 total) and fees are £3,800, creditors receive £3,400 and your remaining £12,800 debt is written off.

IVA vs Other Debt Solutions

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An IVA isn’t the only way to deal with debt. Here’s how it compares to other formal solutions:

IVA vs Bankruptcy

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IVA: Protects your home and assets, lasts 5-6 years, allows you to keep working in most professions, not publicly advertised, remaining debt written off at completion.

Bankruptcy: Usually lasts 12 months, but you may lose your home and assets, publicly advertised, restrictions on certain jobs (accountant, solicitor, company director), remaining debt written off after discharge.

Choose bankruptcy if you have no assets, very low income, and need a faster resolution. Choose an IVA if you own property or need to protect assets.

IVA vs Debt Management Plan

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IVA: Writes off remaining debt, legally binding so creditors must stop contact, interest frozen, 5-6 year fixed term.

DMP: No debt write-off (you repay everything eventually), informal arrangement so creditors can still pursue you, interest may continue, flexible duration.

A DMP suits people who can afford to repay debts in full but need lower payments. An IVA suits people who cannot realistically repay everything.

IVA vs Debt Relief Order

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DRO: Costs just £90, lasts 12 months, writes off all debt, but you must owe less than £30,000, have minimal assets (under £2,000), and very low income (less than £75/month spare).

If you qualify for a DRO, it’s faster and cheaper than an IVA. But if you earn too much or owe over £30,000, an IVA is more suitable.

Breathing Space Scheme

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Before committing to any debt solution, consider applying for Breathing Space (Debt Respite Scheme). This gives you 60 days of legal protection where creditors must stop contact and freeze interest while you get advice and decide on the best solution. Your debt advisor can help you apply.

For comprehensive comparisons and help choosing the right solution, visit our debt help page or read about writing off debt.

Frequently Asked Questions

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What is an IVA?

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An Individual Voluntary Arrangement is a formal, legally binding agreement under the Insolvency Act 1986 where you pay what you can afford towards your debts for 5-6 years, then remaining debt is written off. A licensed Insolvency Practitioner manages the arrangement.

How long does an IVA last?

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Standard IVA term is 60 months (5 years). If you’re a homeowner with equity, you may be asked to extend by 12 months if you can’t remortgage. Total maximum duration is typically 72 months (6 years). Payment breaks for genuine hardship can extend the term further.

Will an IVA affect my mortgage?

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An existing mortgage isn’t affected directly. You continue making payments as normal. However, getting a new mortgage during an IVA is extremely difficult due to the credit file impact. After your IVA completes and comes off your credit file (6 years), you can apply for mortgages again, though you may need a larger deposit.

Can I get a car on finance with an IVA?

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Getting car finance during an IVA is very difficult. You need permission from your Insolvency Practitioner, and most lenders won’t approve you. Some specialist lenders deal with people in IVAs but charge high interest rates. If you need a car for work, it’s better to save and buy something outright.

Will my employer know about my IVA?

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For most jobs, no. You’re not required to tell your employer, and they won’t be contacted. However, if you work in certain regulated roles (police, armed forces, some financial services positions), you may need to disclose it. Check your employment contract. Your IP can advise on your specific situation.

What happens if my IVA fails?

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If you can’t maintain payments and your IVA fails, you’ll have paid money into it but still owe the original debt. Creditors can resume collection, including court action. You may be advised to consider bankruptcy instead. This is why it’s critical to be realistic about affordability before starting an IVA. Around 1 in 3 IVAs fail, mainly due to lost income.

Can I end an IVA early?

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You can request an early settlement if you come into money (inheritance, house sale, redundancy). Your IP calculates a lump sum to settle the IVA, usually the remaining payments plus some of the debt that would have been written off. You can also apply for an early completion if your circumstances change significantly, but creditors must agree.

Is an IVA better than bankruptcy?

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It depends on your situation. An IVA is better if you own a home you want to protect, have assets, or work in a profession where bankruptcy would cause problems. Bankruptcy is faster (12 months vs 5-6 years) and better if you have no assets and very low income. Get advice to understand which suits you.

How much debt write-off can I expect?

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Most people completing an IVA write off 60-70% of their original debt. If you owe £25,000 and pay £150/month for 5 years, you’ll pay £9,000 total (including fees). Creditors receive around £5,500, and £19,500 is written off. The exact amount depends on your income, expenses, and how much you can afford to pay.

Choose the Right IVA Company

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Not all IVA providers are the same. When choosing who to work with, look for:

• Licensed Insolvency Practitioners regulated by professional bodies (Insolvency Practitioners Association, ICAEW, ICAS)
• Transparent fee structures with no hidden charges
• Clear explanations of alternatives before recommending an IVA
• Honest discussions about failure rates and risks
• Reviews and testimonials from previous clients

Compare IVA companies to find licensed providers and learn the red flags that mark companies to avoid.

Get Free IVA Advice

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If you’re struggling with debts of £5,000 or more and can’t see a way to clear them, an IVA could provide the solution. The earlier you get advice, the more options remain available to you.

Our service is completely free and confidential. We’ll assess your situation honestly and explain all your options, not just IVAs. Whether you qualify or not, you’ll leave the conversation with clarity about your next steps.

For more information about IVAs and other debt solutions, explore our comprehensive guides:

• What is an IVA? - Complete guide to how IVAs work
• IVA Criteria - Detailed eligibility requirements
• IVA Pros and Cons - Honest advantages and disadvantages
• Council Tax Arrears - Dealing with council tax debt
• Debt Collectors - Your rights when being chased
• Bailiffs - What bailiffs can and can’t do
• Debt Help - All debt solution options explained

Testimonials

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“Thanks so much to Ethan & Matt for guiding me through the initial process. They were professional, informative and highly supportive.”

“Good advice and very helpful.”

“Very helpful and supportive of my situation no judging talked me through the process very professional.”