What Is an IVA? The Complete Guide to Individual Voluntary Arrangements

If you’re struggling with debts you can’t repay, an Individual Voluntary Arrangement (IVA) might offer a way forward. This guide explains exactly how IVAs work, what they cost, who qualifies, and what life actually looks like when you’re living with one for 5-6 years. We’ll cover the legal framework, the practical reality, the risks, and the alternatives so you can make the right decision for your situation.

What Is an IVA?

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An Individual Voluntary Arrangement (IVA) is a legally binding agreement under Part VIII of the Insolvency Act 1986 between you and your creditors. You make affordable monthly payments for 5-6 years through a licensed Insolvency Practitioner. At the end of the term, any remaining debt is legally written off.

Here’s how it works in plain English: You owe £20,000 across multiple credit cards, loans, and overdrafts. You can’t afford the minimum payments. An IVA allows you to pay, say, £120 per month for 60 months based on what you can genuinely afford after essential living costs. That’s £7,200 total. The remaining £12,800 is written off and you become debt-free.

The arrangement is managed by a licensed Insolvency Practitioner (IP) who acts on your behalf. Once approved by your creditors, the IVA becomes legally binding on both sides. Creditors must stop chasing you, interest freezes, and you’re protected from legal action as long as you keep up your agreed payments.

IVAs were introduced as part of the Insolvency Act 1986 to provide an alternative to bankruptcy. Around 67,000 people entered IVAs in 2024 across England, Wales, and Northern Ireland. They’re a formal insolvency solution, not a loan or debt consolidation product. Your details go on the Individual Insolvency Register, a public record, though it’s not advertised and most people won’t know unless they specifically search for it.

How Does an IVA Work?

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An IVA follows a structured process overseen by your Insolvency Practitioner. Here’s what actually happens from start to finish.

1. Free Assessment with a Debt Advisor

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You contact a debt advice service or IVA provider. They assess your income, essential expenses, and debts to see if an IVA is suitable. Legitimate advisors must discuss all debt solutions with you — not just IVAs. This includes Debt Management Plans (if you can afford to repay in full), Debt Relief Orders (if you owe under £30,000 with minimal assets and very low income), and bankruptcy.

If an IVA looks suitable, they’ll connect you with a licensed IP. The initial advice is free. There are no upfront charges from any legitimate firm.

2. The IP Prepares Your Proposal

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Your IP gathers detailed financial information: income, expenses, debts, assets. They use this to prepare a formal proposal under the IVA Protocol (updated in 2025). This protocol is an industry code of practice that sets standards for straightforward consumer IVAs.

The proposal explains what you can afford to pay each month, how long the IVA will last, and what creditors can expect to receive. It must demonstrate that creditors will get more than they would if you were made bankrupt.

3. The Creditor Vote

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Your IP sends the proposal to all your creditors and calls a creditors’ meeting. Most meetings are now virtual or handled by proxy — you don’t attend.

Here’s the critical detail most guides miss: You need 75% approval by value of the creditors who actually vote. It’s not 75% of all creditors. It’s 75% by debt value of those who cast a vote.

This means a single large creditor holding more than 25% of your total debt has effective veto power. If you owe £20,000 total and one creditor holds £6,000 of that, they can block the IVA if they vote against it. In practice, most creditors vote in favour because the proposal demonstrates they’ll receive more than through bankruptcy.

HMRC (if you owe tax or National Insurance arrears) often votes but may attach “standard conditions” requiring higher payments or specific treatment of their debt. Large banks and credit card companies typically have standard criteria and vote to accept if those are met.

4. Approval and Legal Protection

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Once 75% by value approve, the IVA becomes binding on all creditors — even those who voted against or didn’t vote. From this moment:

• All interest and charges freeze completely
• Creditors must stop contacting you
• Legal action (court claims, bailiff action) is stopped
• You’re protected from bankruptcy proceedings

The IP transitions from “Nominee” (setting up the IVA) to “Supervisor” (managing it for the next 5-6 years).

5. Monthly Payments for 60 Months

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You make one monthly payment to your IP. Standard term is 60 months (5 years). The IP collects these payments and distributes them to creditors according to the agreed proposal.

If you’re a homeowner with equity, you may be asked to attempt remortgaging in month 54 to release equity for creditors. If you can’t remortgage (most can’t due to credit damage), the IVA extends by 12 months to 72 months total. Under the 2025 Protocol update, the mandatory equity release requirement has been removed for homeowners who genuinely can’t remortgage.

6. Annual Reviews

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Every year, your IP reviews your financial situation. You provide updated bank statements, payslips, and details of any changes in income or circumstances. If your income has increased significantly, they may propose increasing your monthly payment. If your income has dropped, you can request a reduction or payment break.

The “50/50 rule” applies to overtime and bonuses: You’re typically allowed to keep the first 10% of your normal take-home pay as overtime or bonus. Anything above that is split 50/50 — half goes to creditors, half you keep.

7. Completion

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After your final payment, the IP issues a completion certificate. This confirms your IVA is finished and all remaining debt is legally written off. The certificate is proof you’re debt-free.

Industry standard is 8-12 weeks for certificate issuance after your final payment, though some firms take longer. Ask prospective IVA providers about their average completion certificate timeline.

What Does an IVA Actually Cost?

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IVA fees are often presented vaguely. Here’s a worked example with real numbers so you know exactly where your money goes.

Scenario: You owe £20,000. Your IP calculates you can afford £120 per month for 60 months.

Total you’ll pay: £120 × 60 = £7,200

How that £7,200 is split:

Debt written off: £20,000 - £3,676 = £16,324

These fees are agreed by your creditors as part of the proposal. They’re not set arbitrarily by the IP. Creditors accept that fees come out of your payments because they’re still getting more than they would through bankruptcy (where they might get nothing).

No legitimate IVA firm charges upfront fees. The 2021 IVA Protocol explicitly prohibits pre-approval charges. If a firm asks for money before your IVA is approved, walk away.

Important: Charities like StepChange charge the same fee structure. “Free advice” means the initial consultation is free, not that the IVA itself is free. All Insolvency Practitioners — charity or commercial — charge nominee and supervisor fees during the IVA. These are standard across the industry.

Do You Qualify for an IVA?

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

Minimum debt: £5,000+ in unsecured debts. There’s no legal minimum, but practically, IPs won’t propose an IVA for debts under £5,000-£6,000 because the fees make it unviable.

Multiple creditors: At least 2 creditors. You can’t have an IVA for a single debt.

Regular income: From employment, self-employment, or benefits. You need to demonstrate you can maintain monthly payments for 5-6 years.

Spare income: After essential living costs, you need £80-£100+ per month available for IVA payments.

Insolvency: You can’t pay your debts when they’re due, and the value of your debts exceeds your assets.

Geography: You must live in England, Wales, or Northern Ireland. Scotland has a different system (Trust Deeds).

Self-employed people can get IVAs if they can show regular earnings. Benefits count as income. The key is demonstrating stability and affordability.

Check If You Qualify

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Not sure if you meet these criteria? Use our IVA calculator to check if you qualify and see how much debt you could write off. Takes 2 minutes, completely free, no impact on your credit score. Or read our detailed 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. You can’t pick and choose which creditors to include. Here’s what goes in and what doesn’t:

Debts That CAN Go Into an IVA

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• Credit cards and store cards
• Personal loans and bank overdrafts
• Payday loans and high-cost short-term credit
• Catalogue debts (Very, Littlewoods, etc.)
• Council tax arrears
• HMRC debts (tax, National Insurance, tax credit overpayments)
• Utility bill arrears (gas, electric, water)
• CCJ debts and County Court judgments
• Debts with debt collectors and bailiffs
• Mortgage shortfalls (after repossession)

Debts That CANNOT Go Into an IVA

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• Secured loans and standard mortgage payments (the debt secured on your home)
• Student loans
• Court fines and magistrates’ fines
• Child maintenance arrears
• TV licence fines
• Social Fund loans
• Hire purchase agreements (car finance you’re still paying)
• Parking penalty charges (in most cases)

Special Cases

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HMRC debts: Can be included, but HMRC votes on proposals and often demands higher payments or attaches conditions. They’re a “priority creditor” and may insist on a larger share of your monthly payment than other creditors.

Council tax arrears: Fully includable and treated as a priority debt. Once the IVA is approved, the council must stop enforcement action.

Joint debts: Your share of the debt goes into the IVA, but creditors can still chase your partner or joint debtor for their share. We’ll cover this in detail below.

For specific debt types, see our guides on credit card debt management, council tax problems, and HMRC debt.

What Happens During an IVA? Living With It for 5-6 Years

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This is the section most guides skip. They tell you an IVA lasts 5 years but don’t explain what those 5 years actually feel like. Here’s the reality.

Your Budget: Standard Financial Statement Allowances

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Your monthly budget is based on the Standard Financial Statement (SFS), a framework used across the debt advice sector. You’ll have allowances for:

• Food and housekeeping: £450-£500 per month for a family of four
• Clothing and personal care: £50-£80 per month
• Utilities: Gas, electric, water, council tax
• Transport: Car costs (fuel, insurance, MOT, repairs) or public transport
• Mobile phone and broadband: Reasonable tariffs
• Childcare and school costs: Uniforms, trips, activities
• Leisure and entertainment: £30-£50 per month for a family

These aren’t poverty-level budgets. The aim is to live modestly but not miserably. You’re expected to cut back on luxuries (expensive holidays, eating out frequently, premium subscriptions) but not live on bread and water.

Annual Reviews: What Actually Happens

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Every year, your IP conducts a fresh income and expenditure assessment. You provide:

• 3 months of bank statements
• Recent payslips
• Evidence of any changes in circumstances

They’re checking whether your income has increased significantly. If you’ve had a promotion or pay rise, they may propose increasing your monthly payment. This requires creditor approval — your IP can’t unilaterally increase payments.

If your income has dropped (reduced hours, job loss), you can request a payment reduction or payment break. Missed months get added to the end of your term.

The 50/50 rule: Overtime and bonuses are treated specially. You’re typically allowed to keep the first 10% of your normal take-home pay earned as overtime or bonus. Anything above that is split 50/50 — half goes into the IVA, half you keep. This incentivises you to work extra without penalising you entirely.

Windfalls: Everything Over £500 Goes to Creditors

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If you receive unexpected money during your IVA, it goes to your creditors. This includes:

• Inheritances
• Lottery or gambling wins
• PPI refunds
• Redundancy payments (beyond the statutory minimum)
• Work bonuses (subject to the 50/50 rule above)
• Tax refunds

Anything under £500 you can keep. Anything over £500 must be reported to your IP and paid into the IVA. If your elderly parent passes away and leaves you £10,000, that £10,000 goes to your creditors, not to you.

This can be emotionally difficult on top of the financial reality. Many people find this clause one of the hardest parts of an IVA.

Borrowing: Can’t Borrow Over £500 Without Permission

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For the entire duration of your IVA, you cannot take out credit over £500 without your IP’s permission. This includes:

• Credit cards
• Personal loans
• Car finance
• Store cards
• Mobile phone contracts with an upfront handset cost

If your washing machine breaks or your boiler fails, you can’t just put it on credit. You need to plan for emergencies by building savings within your budget, or ask your IP for permission before borrowing.

Some specialist lenders offer credit to people in IVAs, but interest rates are high. Avoid these if possible.

The Social Cost: What Nobody Tells You

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Five years is a long time. Here’s what that might look like:

Birthdays and Christmas: You’ll need to budget carefully. Generous gifts are off the table. You might explain to family that you can’t contribute as much as usual to shared celebrations.

Holidays: You can go on holiday, but not expensive foreign trips. Budget UK breaks or staycations are fine. Some people find creative ways (camping, house swaps) to make it work.

Friends and family: You might have to decline invitations to expensive meals, events, or activities. This can be socially isolating. Being honest with close friends helps (“I’m on a tight budget right now, can we do something cheaper?”).

Emergency repairs: Car breakdowns, home repairs, dental work — you need to save for these within your budget. There’s no credit safety net.

Mental health: The relief of stopping creditor harassment is real and significant. But the ongoing stress of restricted spending, annual reviews, and fear of IVA failure takes a toll. Some people thrive under the structure; others find it suffocating.

This isn’t meant to scare you. It’s meant to help you make a realistic decision. Five years is manageable if you go in with your eyes open.

Payment Breaks: Available for Genuine Hardship

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If you lose your job, have unexpected medical expenses, or hit genuine hardship, you can request a payment break. The IP assesses your situation. If approved, missed months get added to the end of your term.

Payment breaks aren’t a free pass to skip payments whenever you fancy. They’re for serious, temporary problems. But the flexibility is there when you genuinely need it.

Bank Accounts: Some Banks Will Close Yours

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Some banks automatically close accounts when you enter an IVA, particularly if you owe them money. You’ll need to open a basic bank account with another provider. These accounts work fine for everyday banking but have no overdraft facility.

It’s disruptive, but not a disaster. Make sure you have a backup account ready before your IVA starts.

The Insolvency Register: It’s Public but Not Advertised

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Your details go on the Individual Insolvency Register, which is publicly searchable online. Your name, address, date of birth, and IVA details are listed for the duration plus 3 months.

It’s not advertised. Employers, landlords, or anyone else can search for you if they think to look, but most people never experience problems with this. Your IVA doesn’t appear in newspapers or local announcements like bankruptcy sometimes does.

What Happens If Your IVA Fails?

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Let’s be honest about the failure rate. Around 1 in 3 IVAs don’t make it to completion. This isn’t a scare tactic — it’s reality. Understanding why IVAs fail helps you avoid those pitfalls.

Main Reasons IVAs Fail

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Lost income: Job loss, reduced hours, illness preventing work. If you can’t maintain payments and can’t arrange a payment break or reduction, the IVA may be terminated.

Changed circumstances: Relationship breakdown, unexpected expenses, caring responsibilities. Life doesn’t stop for 5 years.

Restrictions too difficult: Some people find the budgeting restrictions, borrowing limits, and windfall clauses impossible to maintain long-term.

Mis-selling: IVAs set up for people whose income was too volatile or whose debt was too low. These arrangements were never sustainable.

The Breach Process

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If you miss payments and don’t communicate with your IP, they’ll issue a Notice of Breach. You have one month to remedy the breach (catch up on missed payments or agree a variation).

If you can’t remedy the breach, the IP issues a Certificate of Termination. Your IVA is over.

What Happens After Failure

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The money you’ve paid into the IVA is gone. Creditors keep it. But the remaining debt isn’t written off.

Creditors can now resume collection for the full original debt plus any backdated interest that was frozen. They can:

• Chase you directly again
• Take you to court for CCJs
• Instruct bailiffs (if they have a court order)
• Make you bankrupt if the debt is over £5,000

You’re back to square one, but you’ve paid money in with nothing to show for it.

This is why choosing the right IVA company and being realistic about affordability before you start is critical. Don’t let anyone pressure you into an IVA if your budget is tight or your income is unstable.

IVA and Your Home

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One of the biggest advantages of an IVA over bankruptcy is that you won’t be forced to sell your home.

You Keep Your Home

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Unlike bankruptcy, where trustees can force a sale, an IVA allows you to stay in your property. You continue making mortgage payments as normal (mortgages are excluded from the IVA).

The Equity Release Clause

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If you’re a homeowner with equity, the IVA proposal will include an “equity release clause.” Here’s how it works:

In month 54 (year 5), you must attempt to remortgage to release equity for your creditors. The target is usually to release enough equity to pay creditors 85% of your remaining debt.

De minimis threshold: If your equity is below £10,000 (after deducting the outstanding mortgage and selling costs), you don’t have to remortgage. The amount varies by provider.

If you can’t remortgage: Most people in IVAs can’t remortgage due to the credit damage. If you genuinely try and fail (provide evidence of refusals), the IVA extends by 12 months to 72 months total instead.

2025 Protocol update: The mandatory equity release requirement has been removed for homeowners who can’t remortgage due to circumstances beyond their control. This change protects vulnerable homeowners who were being unfairly penalised.

Joint Ownership

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If you jointly own your home with a partner who isn’t in an IVA, their share of the equity is protected. Only your share is considered for equity release.

IVA vs Bankruptcy

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How do you choose between an IVA and bankruptcy? Here’s a quick comparison.

Duration:

• IVA: 5-6 years
• Bankruptcy: 12 months typically

Your home:

• IVA: Keep it
• Bankruptcy: May be forced to sell

Assets:

• IVA: Keep car (if needed), belongings
• Bankruptcy: May lose valuable assets

Employment:

• IVA: Most jobs unaffected
• Bankruptcy: Restricted professions (accountant, solicitor, company director, some public sector)

Public record:

• IVA: Insolvency Register (not advertised)
• Bankruptcy: Advertised in London Gazette, sometimes local papers

Credit file impact:

• Both: 6 years

Debt write-off:

• IVA: After 5-6 years
• Bankruptcy: After discharge (usually 12 months)

Choose bankruptcy if: You have no assets, very low income, no home to protect, and need a faster resolution.

Choose an IVA if: You’re a homeowner, have assets to protect, work in a profession where bankruptcy restrictions apply, or can afford monthly payments.

Both options write off debt. Neither is “better” — it depends entirely on your circumstances. Our homepage has a detailed comparison of all debt solutions, or you can read our guide: IVA Pros and Cons

Joint Debts and Interlocking IVAs

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An IVA covers one person only. If you have joint debts with a partner, spouse, or family member, here’s what happens.

Joint Debts

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Your share of any joint debt goes into your IVA. But creditors can still chase your joint debtor for their share.

Example: You and your partner have a joint loan of £10,000. Your £5,000 share goes into your IVA. The creditor can still pursue your partner for their £5,000. Your IVA doesn’t protect them.

This can cause relationship stress. The creditor will likely focus collection efforts on whichever debtor isn’t protected by an IVA.

Interlocking IVAs for Couples

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If both partners have debt, you can get “interlocking IVAs.” These are two separate IVAs that share one household budget and are managed by the same Insolvency Practitioner.

How it works:

• The IP assesses your combined household income and expenses
• They calculate what you can afford as a household
• They split this fairly between the two IVAs
• Both IVAs are approved by their respective creditors
• You make two separate monthly payments (or one combined payment that the IP splits)

Interlocking IVAs protect both partners and prevent one person from being chased while the other has protection.

Impact on Your Partner’s Credit File

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Your partner’s credit file won’t show YOUR IVA. But joint debts will affect both credit files. If you default on a joint debt before the IVA, both partners get the default marker.

Your partner can still apply for credit in their own name (not joint), though their affordability will be affected by the household budget implications.

Breathing Space: 60-Day Protection Before an IVA

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Before committing to an IVA, you can apply for “Breathing Space” — formally the Debt Respite Scheme. This gives you 60 days of legal protection while you get advice and decide on the best solution.

What Breathing Space Does

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• Stops creditor contact: Creditors must stop chasing you
• Freezes interest and charges: No new interest accrues
• Halts enforcement: Bailiff action, court proceedings, and other enforcement stops
• Gives you time: 60 days to get professional advice without pressure

How to Apply

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You can’t apply directly. You must go through an authorised debt advisor like StepChange, Citizens Advice, or National Debtline. They assess your situation and, if appropriate, apply on your behalf.

Once approved, your advisor notifies all your creditors, who must comply within one working day.

Using Breathing Space to Set Up an IVA

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The 60-day protection gives your IP time to prepare your IVA proposal without creditors taking enforcement action. Interest is frozen during this period, preventing your debt from growing.

After 60 days, Breathing Space ends. If you’ve started an IVA by then, the IVA’s legal protections take over. If you haven’t, creditors can resume collection.

Breathing Space is particularly valuable if you’re facing immediate bailiff action or court hearings. It provides a legal pause button.

If you’re struggling with debt and want to find out what options are available, use our free IVA calculator to see how much you could write off.

Frequently Asked Questions

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How long does an IVA last?

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Standard IVA term is 60 months (5 years). If you’re a homeowner and need to attempt equity release, the IVA may extend to 72 months (6 years) if remortgaging isn’t possible. Payment breaks for genuine hardship can further extend the term, as missed months get added to the end.

How much debt do I need for an IVA?

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There’s no legal minimum, but practically you need at least £5,000-£6,000 in unsecured debts owed to 2 or more creditors. Below this, the fees make an IVA unviable. If you owe under £30,000 with minimal assets and very low income, a Debt Relief Order might be more suitable — it costs just £90 and writes off all debt after 12 months.

Will an IVA affect my job?

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For most jobs, no. Employers rarely ask about insolvency, and you’re not required to disclose it unless your contract specifically requires it. Exceptions include certain regulated professions: police, armed forces, some roles in finance, law, accountancy, and some public sector positions handling money. Check your employment contract and speak to your IP if you’re unsure.

Can I keep my car in an IVA?

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Yes, if you need it for work or essential use (getting kids to school, medical appointments). If your car isn’t essential, you can usually keep vehicles worth under £2,000. If it’s worth more, you may be asked to sell it and replace it with something cheaper. But if the car is genuinely essential, you keep it regardless of value.

Will an IVA affect my partner?

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Your IVA only affects you unless you have joint debts or joint assets. If you have a joint bank account, your partner should open their own account to avoid complications. If you have joint debt, your partner remains liable for the full amount. Your partner’s credit file won’t show your IVA, but lenders may ask about household finances when assessing their applications.

Can I go on holiday during an IVA?

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Yes, but you need to budget for it within your monthly allowances. Expensive foreign holidays are off the table, but budget UK breaks or camping trips are fine. Save for holidays from your agreed leisure budget. Some IPs ask you to notify them before travelling abroad, but they can’t unreasonably refuse.

What happens when my IVA ends?

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After your final payment, your IP issues a completion certificate confirming all remaining debt is legally written off. You’re debt-free. Your IVA stays on your credit file for 6 years from the start date, then it’s completely removed. You can start rebuilding your credit immediately — get a credit-builder card, make small purchases, pay them off in full. Many people can get a mortgage 1-2 years after their IVA comes off their file, though you’ll need a decent deposit.

Can I pay off my IVA early?

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Yes, if you come into money (inheritance, house sale). You’d need to pay a lump sum covering the remaining agreed payments plus some of the debt that would have been written off. Your IP calculates the amount. You can also apply for early completion if your circumstances change significantly, but creditors must agree.

Is an IVA public?

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Yes. Your details appear on the Individual Insolvency Register, which is publicly searchable online. Your name, address, date of birth, and IVA details are listed for the duration plus 3 months. It’s not advertised in newspapers or announced to anyone, but employers, landlords, or anyone else can search for you if they think to look. Most people never experience problems with this.

Do I have to pay for an IVA?

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Yes, but fees come from your monthly payments — nothing upfront. Typical total fees are £3,650-£4,300 over the life of the IVA, comprising nominee fee (£1,000-£2,000), supervisor fee (15-20% of payments), and disbursements (£500-£1,000). These fees are agreed by creditors. No legitimate firm charges upfront. Charities charge the same fee structure — “free advice” means the consultation is free, not the IVA itself.

Ready to find out if an IVA could help you?

Use our IVA calculator to check if you qualify and get an instant estimate of how much debt you could write off. Takes 2 minutes, free, no impact on your credit score. If you qualify, we’ll connect you with licensed Insolvency Practitioners for free, impartial advice.

For more information about IVAs and alternatives:

• Is an IVA Suitable for Me? — Detailed eligibility and suitability guide
• IVA Pros and Cons — Honest advantages and disadvantages
• IVA Companies: How to Choose — Best providers and red flags to avoid
• Debt Management Plan — Alternative if you can repay in full
• Debt Relief Order — Faster, cheaper alternative for low income/assets
• Write Off Debt — All debt write-off options explained