IVA Guide UK — Individual Voluntary Arrangements Explained
What is an IVA? How Individual Voluntary Arrangements work, eligibility, costs, pros and cons, and how they affect your credit score and future finances.
An Individual Voluntary Arrangement (IVA) is a formal debt solution for people who cannot afford to repay their debts in full. It can write off a significant portion of what you owe — but it is a serious commitment with long-lasting consequences for your credit and finances.
How an IVA Works
Stage
What Happens
1. Assessment
Insolvency practitioner (IP) reviews your income, expenditure, and debts
2. Proposal
IP drafts an IVA proposal to your creditors
3. Creditor vote
Creditors holding 75%+ of your debt (by value) must approve
4. Implementation
You make agreed monthly payments for 5–6 years
5. Completion
Remaining included debt is legally written off
Eligibility
Requirement
Detail
Minimum debt
Typically £6,000–£10,000+ (unsecured)
Number of creditors
Usually 2 or more
Disposable income
Enough to make meaningful payments (£80–£100+/month)
Residency
Must be resident in England, Wales, or Northern Ireland (Scotland uses a Protected Trust Deed)
Type of debt
Unsecured debts only (credit cards, loans, overdrafts, catalogue debts)
What Debts Can Be Included?
Included
Not Included
Credit cards
Mortgage arrears
Personal loans
Secured loans
Overdrafts
Student loans
Store cards
Child maintenance
Catalogue debts
Court fines
HMRC debts (sometimes)
Council tax arrears (sometimes)
Payday loans
Fraud-related debts
Typical IVA Terms
Feature
Typical Terms
Duration
5–6 years
Monthly payment
Based on disposable income (usually £100–£400)
Total repaid
30–60% of original debt
Debt written off
40–70% of original debt
IP fees
Paid from your contributions (not extra)
Example
Detail
Amount
Total unsecured debt
£30,000
Monthly payment
£200
IVA duration
60 months
Total repaid
£12,000
Debt written off
£18,000 (60%)
Pros and Cons
Advantages
Advantage
Detail
Debt written off
Typically 40–70% of your debt
Single payment
One affordable monthly amount
Legal protection
Creditors cannot chase you (if they voted for the IVA)
Interest frozen
No more interest or charges on included debts
Avoid bankruptcy
Less severe than bankruptcy in some respects
Keep your home
Usually (though equity may need to be released)
Disadvantages
Disadvantage
Detail
Credit file
Recorded for 6 years — severely affects borrowing
Public record
Listed on the Individual Insolvency Register
Restrictions
Must disclose when applying for credit over £500
Home equity
May need to remortgage or extend the IVA to release equity
Windfall clause
Inheritances, PPI payouts etc. must be paid into the IVA
Failure risk
If you cannot maintain payments, it can fail (leading to bankruptcy)
Long commitment
5–6 years of reduced living standard
Impact on Your Life
Area
Impact
Credit score
Severely damaged for 6+ years
Bank account
May need to change to a basic account
Mortgage
Very difficult to get during the IVA
Employment
Must disclose for some jobs (finance, legal, military)
Renting
Some landlords check credit — may be harder
Car finance
Not available during the IVA
Mobile phone contract
May be declined — use pay-as-you-go
Alternatives to an IVA
Alternative
Best For
Debt management plan
If you can repay debts in full but need lower payments
Balance transfer
If debt is manageable and you have a reasonable credit score
Debt consolidation
If you can get a lower interest rate
Bankruptcy
If debts are completely unmanageable
Debt Relief Order (DRO)
Low income, few assets, debts under £30,000
Full and final settlement
If you have a lump sum to offer creditors
Important Warnings
Never pay for debt advice — free services (StepChange, National Debtline, Citizens Advice) are available
Beware IVA “factories” — some companies aggressively market IVAs when they are not the best solution
An IVA is not right for everyone — always explore alternatives first
Get independent advice — from a free debt charity, not a commercial IVA provider
Understand the full commitment — 5–6 years of restricted finances
Getting Help
Organisation
Contact
StepChange
0800 138 1111 (free)
National Debtline
0808 808 4000 (free)
Citizens Advice
citizensadvice.org.uk
MoneyHelper
0800 138 7777 (free)
IVA vs Other Debt Solutions: A Detailed Comparison
An IVA is one of several formal debt solutions available in England, Wales, and Northern Ireland (Scotland has its own equivalents). Understanding the alternatives is essential before committing:
Debt solution
Min debt
Types of debt
Credit file impact
Length
Asset risk
Debt Management Plan (DMP)
Any
Unsecured only
Markers on file
Until cleared
Low
Individual Voluntary Arrangement (IVA)
~£10,000
Unsecured
6 years on file
5–6 years
Home equity if owned
Debt Relief Order (DRO)
Under £30,000 debt
Unsecured
6 years on file
12 months
Very low asset limit
Bankruptcy
Any
Unsecured + some secured
6 years on file
12 months to discharge
High — assets can be seized
Sequestration (Scotland)
Any
Same
6 years on file
12 months
High
Protected Trust Deed (Scotland)
~£10,000
Unsecured
6 years on file
4 years
Home equity if owned
For England and Wales, a DRO is often the better option than an IVA if your total debt is under £30,000 and you have no assets and no surplus income. DROs cost £90 compared to typical IVA setup fees of £1,000–£3,000.
How an IVA Affects Your Home
If you own your home, the IVA will include your home equity in the arrangement. Typically:
In year 4/5 of your IVA, you’ll be asked to release equity by remortgaging (if you can)
If you can’t remortgage, your IVA may be extended by 12 months instead
You don’t automatically lose your home in an IVA (unlike bankruptcy, where the trustee can force a sale)
However, your home equity does not “belong” solely to you during the IVA — it is a creditor asset
If you are a homeowner with significant equity, get specialist advice before agreeing to an IVA.
What Happens if an IVA Fails?
An IVA fails (is revoked) when you miss too many payments and can’t agree a variation with your IP. Consequences:
All the debts that were covered by the IVA become immediately payable again in full (with accrued interest in some cases)
Creditors can take individual legal action — including County Court Judgements, charging orders, bailiff action
The failed IVA remains on your credit file for 6 years from the date the IVA commenced (not the failure date)
In some cases, if the IP believes there were assets or income you failed to disclose, criminal fraud charges are possible
If you’re struggling to make IVA payments: Contact your IP immediately. A payment variation (“variation meeting”) can be arranged to lower payments if your circumstances have genuinely changed.
The Effect of an IVA on Employment
Situation
Impact
Most employed workers
No direct impact — employer usually not notified
Financial sector workers (FCA regulated)
May breach conditions of authorisation — check FCA rules
Solicitors, accountants in practice
May affect practising certificate — check with professional body
Government security clearance
IVA likely triggers review of clearance
Company director
You can remain a director in an IVA (unlike bankruptcy)
Self-employed
You can continue to trade (unlike bankruptcy)
How Your Credit File Is Affected
The IVA is registered on the Insolvency Register (public record, searchable online)
It appears as a default or IVA marker on your credit file with all three agencies (Experian, Equifax, TransUnion)
The marker remains for 6 years from the date the IVA commences — not from completion
After 6 years, it is automatically removed and your credit file starts fresh
Rebuilding credit after IVA is possible — secured credit cards and credit-builder products help
Finding a Reputable IP
Insolvency Practitioners (IPs) must be licensed by a recognised professional body. Legitimate IPs are listed on the GOV.UK Insolvency Service register. Beware:
Companies that cold-call you promoting IVAs
“Debt help” websites that earn referral fees for steering you into IVAs
Any company that charges upfront fees for debt advice
The safest route is to start with a free debt charity (StepChange, National Debtline) who will assess whether an IVA is appropriate and, if so, refer you to a licensed IP.