What Is an IVA? Individual Voluntary Arrangements Explained

An Individual Voluntary Arrangement (IVA) is a formal, legally binding way to repay some or all of your debts through a licensed insolvency practitioner. Before you consider one, get free, impartial advice, since IVAs are not right for everyone and are often sold rather than recommended.

What Is an IVA?

An IVA, or Individual Voluntary Arrangement, is a formal, legally binding agreement between you and the people you owe money to, to repay some or all of your debts over a set period. It is set up through a licensed insolvency practitioner (IP), who assesses what you can realistically afford, puts together a proposal, and manages the payments to your creditors once the arrangement is approved.

An IVA typically lasts 5 years. If you own your home and have equity in it, the arrangement is often extended to 6 years, with an expectation that you try to release some of that equity, for example by remortgaging, in the final year to increase what your creditors receive.

For an IVA to go ahead, your proposal has to be put to your creditors, and enough of them, by value of the debt owed, have to approve it. Once that happens, the IVA becomes binding on every creditor included in it, even ones who voted against the proposal or did not vote at all. This is what makes an IVA different from an informal payment plan you arrange yourself: once approved, no individual creditor can opt out or take separate action against you. Section 260 of the Insolvency Act 1986 sets out this binding effect once a voluntary arrangement is approved by creditors.

While the IVA is running, interest and charges on the included debts are normally frozen, and your creditors cannot start or continue court action, or contact you directly, about the debts covered by the arrangement.

The Pros and Cons of an IVA

An IVA can offer real protection if it genuinely fits your situation, but it comes with real costs and risks that a commercial IVA advert will not always spell out clearly.

What an IVA can do for you:

• Freeze interest and charges on the debts it covers.
• Stop creditors taking further action against you, or contacting you directly, while it runs.
• Combine multiple debts into one manageable monthly payment.
• Write off the remaining balance on included debts once you complete all the scheduled payments.
• Usually let you keep your home, unlike bankruptcy, subject to the equity-release expectation described above.

What an IVA costs you:

• It appears on the public Individual Insolvency Register and on your credit file for 6 years, which can make it harder to get credit, a mortgage, or certain jobs during that time.
• The insolvency practitioner charges fees for setting up and running the arrangement, taken out of the payments you make, so not all of every payment reaches your creditors.
• It is a long commitment, normally 5 or 6 years, over which your income and circumstances need to stay broadly stable.
• If you miss payments and cannot get the IVA back on track, it can fail entirely, potentially leaving you facing bankruptcy instead.
• It is not available for every kind of debt, and it does not suit everyone's financial circumstances.

Get Free Advice Before You Consider an IVA

IVAs are heavily marketed by commercial firms, and they are also, unfortunately, one of the debt solutions most often mis-sold: people are sometimes signed up for an IVA when it was not the right option, or even a suitable one, for them, without a proper look at cheaper or better alternatives first.

Before you contact any commercial IVA provider, get free, impartial debt advice from a charity: StepChange, National Debtline, Citizens Advice, or MoneyHelper (gov.uk/debt-advice). These organisations can assess your full financial situation, and they are able to either set up an IVA for you or point you towards a cheaper or more suitable option, such as a Debt Relief Order (DRO) or a Debt Management Plan (DMP), entirely free of charge. A commercial IVA firm generally charges, through the fees built into your monthly payments, for exactly the assessment and guidance these charities provide at no cost.

Nobody should tell you an IVA is your only option, or pressure you to sign up quickly. Take the time to get free advice first, understand every option open to you, and only go ahead with an IVA if, after that advice, it turns out to genuinely be the best fit for your circumstances.

Scotland: There Is No IVA, But There Is a Protected Trust Deed

IVAs are available in England, Wales and Northern Ireland, but Scotland does not have them. The broadly equivalent Scottish debt solution is a Protected Trust Deed (PTD), administered under separate Scottish legislation and overseen by the Accountant in Bankruptcy (AiB), rather than the England and Wales insolvency framework that governs IVAs.

A Protected Trust Deed and an IVA share the same basic idea, a formal, binding arrangement to repay creditors over a set period through a licensed insolvency practitioner or trustee, but the detail, the approval process and the surrounding rules are different. If you live in Scotland, do not assume an IVA is available to you, or that the England, Wales and Northern Ireland rules described on this page apply north of the border. See our full debt solutions comparison for how a Protected Trust Deed, DAS and sequestration compare with the England, Wales and Northern Ireland options.

For more on what continues to apply before you reach a formal solution like an IVA, see debt collection rules and how a debt can become statute-barred. For the full picture of every debt solution across all three nations, see our debt solutions comparison, the UK debt and money hub, and the United Kingdom country hub.

This article is general information about Individual Voluntary Arrangements in England, Wales and Northern Ireland, not financial or legal advice. An IVA is not the right solution for everyone and is one of the debt solutions most often mis-sold. Get free, independent guidance from StepChange, National Debtline, Citizens Advice, or MoneyHelper before signing up to an IVA or any commercial debt solution.