England, Wales & NI · 6 min read

IVAs explained: how an Individual Voluntary Arrangement works

An Individual Voluntary Arrangement is a legally binding agreement with your creditors to pay what you can afford, usually over five or six years.

By the Online Debt Help editorial team · Updated

Key points

  • Available in England, Wales and Northern Ireland
  • Usually lasts 5 or 6 years
  • Set up and run by a licensed insolvency practitioner
  • Creditors owed 75% of the debt (by value) who vote must agree
  • Recorded on your credit file for six years

How does an IVA work?

An insolvency practitioner looks at your income, spending and assets and writes a proposal to your creditors. The proposal sets out how much you will pay each month and for how long. Creditors then vote. If creditors owed at least 75% of the debt (of those who vote) agree, the IVA is approved and binds all of your unsecured creditors.

While the IVA runs, interest and charges on the included debts are frozen and creditors can't take further action against you. When you complete it, any unsecured debt left in the arrangement is written off.

Who might an IVA suit?

IVAs are usually used by people with several unsecured debts, a regular income and enough spare money each month to make a meaningful payment. They are often considered by homeowners who want to avoid bankruptcy.

Fees

The insolvency practitioner's fees are taken from your monthly payments, so they reduce how much your creditors receive. Your adviser must explain the fees clearly before you agree.

Risks and downsides

  • It's a long commitment. If you can't keep up payments, the IVA can fail and you could be made bankrupt.
  • Homeowners are often asked to try to release equity towards the end, which can extend the IVA by up to 12 months.
  • The IVA is recorded on your credit file for six years and on the public Individual Insolvency Register.
  • Your payments can go up if your income rises during the IVA.
Be careful with adverts. An IVA is not a "government scheme" and no one can promise a set percentage of debt written off. Always compare it with other options, such as a debt management plan or a Debt Relief Order, with a regulated adviser.
Want to know which options fit your situation?Take the free 60-second check. No credit search, no obligation.
Start free check

Frequently asked questions

How long does an IVA last?

Most IVAs last five or six years. They can be extended if you are a homeowner and are asked to release equity.

Can I get an IVA in Scotland?

No. The Scottish equivalent is a Protected Trust Deed.

Will an IVA affect my credit rating?

Yes. It stays on your credit file for six years from the date it starts.

Free debt advice is available

You can get free, impartial debt advice from not-for-profit organisations through MoneyHelper's debt advice locator.

Sources and further reading

This guide is general information, not advice, and was correct when last updated. Rules and limits can change. Speak to a regulated adviser about your own situation.

0800 368 9324Start free check