Individual Voluntary Arrangement (IVA)
An IVA is a formal, legally binding agreement between you and your creditors to repay what you can afford over a fixed period – usually five or six years. At the end, any remaining unsecured debt included in the arrangement is written off.
What is an IVA?
An Individual Voluntary Arrangement is an insolvency solution available in England, Wales and Northern Ireland. It is set up and supervised by a licensed Insolvency Practitioner (IP). You make one affordable monthly payment to the IP, who distributes it to your creditors. Interest and charges on the debts included are frozen once the arrangement is approved.
For an IVA to go ahead, creditors holding at least 75% of the value of your debts (by those who vote) must agree to the proposal. Once approved, all creditors included are bound by it – even those who voted against.
Who might be suitable for an IVA?
- You have unsecured debts – typically £6,000 or more – with two or more creditors
- You have a regular income and can afford a sustainable monthly contribution after essential living costs
- You live in England, Wales or Northern Ireland
- You want a formal solution that stops creditor action but would prefer to avoid bankruptcy
Suitability is always assessed by a regulated adviser on your full income, expenditure, assets and debts. An IVA is not right for everyone and other options – including free ones – may be more appropriate.
What debts can be included?
Most unsecured debts can be included: credit cards, personal loans, overdrafts, catalogue and store cards, payday loans, council tax arrears, HMRC debts, utility arrears and old defaulted accounts. Secured debts (mortgages, car finance), student loans, child maintenance, court fines and some benefit overpayments cannot be included.
How much does an IVA cost?
Insolvency Practitioners charge fees for setting up (nominee fee) and supervising (supervisor fee) an IVA. These fees are taken from your monthly payments – they are not an additional amount on top of what you agree to pay. Fee levels should be set out clearly before you sign, and creditors must approve them. Always ask how much of your payment goes to fees versus your creditors.
How an IVA affects you
- Credit file: an IVA is recorded for six years from the start date, and your credit rating will be affected during and after the arrangement
- Insolvency Register: your details are published on a public register until three months after completion
- Homeowners: you may be asked to try to release equity from your home in the final year; if you can't, the IVA is often extended by 12 months
- Windfalls: inheritances, bonuses or lottery wins above a set amount usually have to be paid in
- Failure: if you can't keep up payments and the IP can't agree a variation, the IVA can fail and your IP may petition for your bankruptcy
Alternatives to an IVA
Depending on your circumstances, a Debt Management Plan, Debt Relief Order or bankruptcy may be more suitable. If you live in Scotland, the equivalent formal options are a Protected Trust Deed, the Debt Arrangement Scheme or Minimal Asset Process.
Frequently asked questions
Will an IVA stop bailiffs and legal action?
Once an IVA is approved, creditors included in it cannot take further legal action or send enforcement agents for those debts. An interim order can also be applied for while the proposal is being prepared. Debts not included – such as a current council tax year or secured borrowing – are unaffected.
How long does an IVA last?
Usually 60 months (five years). Homeowners who cannot release equity in year five are commonly extended to 72 months. A shorter 'lump sum' IVA is possible where a one-off payment is available.
Can I keep my house and car in an IVA?
Generally yes. Your home is not sold, although you may need to attempt to remortgage in the final year. A vehicle needed for work is normally retained, subject to its value and any finance agreement.
Can I get an IVA with debts under £6,000?
Most IPs set a practical minimum around £6,000 because fees make smaller arrangements uneconomic for creditors. Below that level a DRO or DMP is often more appropriate.
Does an IVA write off debt?
At the end of a successfully completed IVA, the remaining balance of the unsecured debts included is legally written off. The amount written off depends on how much you can afford to pay in over the term – it is not a fixed percentage and no figure can be guaranteed in advance.
Want to know if this applies to you?
Free enquiry. No obligation. Regulated advice before any decision.