What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement — commonly known as an IVA — is a formal, legally binding debt solution available to people in England, Wales, and Northern Ireland. It was introduced under Part VIII of the Insolvency Act 1986 to provide a structured alternative to bankruptcy for individuals with unmanageable unsecured debt.
When an IVA is approved, you agree to repay an affordable portion of your total debt — based on what your income genuinely allows — over a fixed term of five to six years. Your Insolvency Practitioner collects a single monthly payment and distributes it to your creditors. At the end of the agreed term, any remaining eligible debt is legally written off, even if your creditors have only received a fraction of what they were originally owed.
Important: An IVA is only available in England, Wales, and Northern Ireland. If you live in Scotland, the equivalent solution is a Protected Trust Deed. Go Debt Free can connect you with the right regulated specialist for your region.
An IVA requires working with a licensed Insolvency Practitioner who negotiates your terms with creditors.
The legal framework
An IVA is governed by Part VIII of the Insolvency Act 1986 (Sections 252–263). Under Section 253, once creditors representing 75% or more of the total value of your debt vote in favour, the IVA becomes binding on all creditors — including those who voted against it or did not respond. This is one of the most powerful aspects of an IVA: minority creditors cannot opt out.
The IVA Protocol, updated in April 2025, sets out the standard framework that Insolvency Practitioners and creditors must follow for straightforward consumer IVAs. It exists to make the process faster, fairer, and more transparent for everyone involved.
How does an IVA work? The step-by-step process
Understanding exactly what happens during an IVA — from first contact to completion — removes a lot of the anxiety around the process. Here is how it works from start to finish.
Initial assessment with a debt adviser
Before anything else, speak to a qualified debt adviser — either independently or through an FCA-authorised firm. They assess your income, outgoings, debts, and assets to determine whether an IVA is genuinely the most suitable option for your situation. The government provides free debt advice through MoneyHelper and Citizens Advice.
Appoint a licensed Insolvency Practitioner (IP)
Only a licensed Insolvency Practitioner can set up and manage an IVA. Your IP is a qualified professional who holds a licence from a recognised body such as the Insolvency Practitioners Association (IPA) or the Institute of Chartered Accountants in England and Wales (ICAEW). They act on your behalf throughout the entire process.
Prepare your financial statement and proposal
Your IP works with you to prepare a detailed financial statement — a complete picture of your income, essential outgoings, and the debts you owe. Based on this, they calculate a realistic monthly contribution and draft a formal IVA proposal to send to your creditors. The proposal includes the repayment amount, the term, and the conditions of the arrangement.
Creditors vote on your proposal
Your creditors are given the opportunity to review and vote on your proposal. For the IVA to be approved, creditors holding at least 75% of the total value of your debt must vote in favour. If this threshold is met, the IVA is legally binding on all creditors — including any who voted against it. Your IP may also apply for an Interim Order from the court to protect you from creditor action while the vote takes place.
IVA begins — you make monthly payments
Once approved, you make a single monthly payment to your IP. Interest and charges are frozen immediately. Your IP distributes the money among your creditors according to the agreed proposal. Creditors must stop chasing you for payment — though they may still send account statements and balance updates.
Annual reviews throughout the term
Your IP reviews your income and outgoings every year. If your income increases significantly, your contributions may go up. If your circumstances worsen — for example, if you lose your job — your IP can negotiate a temporary payment reduction or payment holiday with creditors. These are added to the end of the term.
IVA completes — remaining debt written off
After you have made all agreed payments — typically over five years (six if you are a homeowner) — your IP issues a Certificate of Completion. Any remaining eligible debt included in the IVA is legally written off. You owe your creditors nothing further. Your name is removed from the Individual Insolvency Register, though the record remains on your credit file for six years from the start date.
Windfalls and pay rises: If you receive an inheritance, redundancy payment, or significant pay increase during your IVA, you are legally obliged to inform your IP. Depending on the amount, some or all of it may need to be paid into the IVA. Always notify your IP immediately — concealing financial changes can result in your IVA being cancelled.
Who is eligible for an IVA?
There is no universal eligibility threshold set in law — different Insolvency Practitioners and creditors may apply different criteria. However, the following are the widely accepted indicators that an IVA may be appropriate for your situation.
You are likely to qualify if:
- You have at least £6,000 in unsecured debt — owed to two or more separate creditors. IVAs are generally not cost-effective for smaller amounts of debt given the fees involved.
- You have a regular monthly income — either from employment, self-employment, or a reliable benefit. You must be able to demonstrate a consistent surplus after essential outgoings. Most IPs require at least £80–£200 per month available for contributions.
- You live in England, Wales, or Northern Ireland — IVAs are not available in Scotland. Scottish residents should explore Protected Trust Deeds instead.
- Your debts are primarily unsecured — credit cards, personal loans, overdrafts, payday loans, and store cards are all typically included. Secured debts, mortgages, and student loans cannot be included.
- You are not currently in an active IVA or bankruptcy — you can only hold one insolvency arrangement at a time.
An IVA is likely not suitable if:
- Your income is primarily state benefits — benefits are generally not suitable for IVA contributions as they are protected income. A Debt Relief Order may be more appropriate.
- Your total assets exceed your total debts — in this case, it may be more practical to use assets to clear debts rather than enter a formal arrangement.
- Most of your debts are to HMRC — HMRC generally does not accept IVA proposals where most of the debt relates to income tax, National Insurance, or tax credits arrears.
- Your debt is very small (under £10,000) — the IP fees associated with an IVA may outweigh the benefit at very low debt levels. A DMP could be a simpler option.
What debts can — and cannot — be included in an IVA?
Understanding which debts are eligible for inclusion is one of the most important aspects of IVA planning. Debts left outside your IVA still need to be managed separately, so your Insolvency Practitioner must review your complete financial picture before drafting the proposal.
Typically included
- Credit card balances
- Personal loans
- Bank overdrafts
- Payday loans
- Store cards and catalogue debt
- Council tax arrears (in some cases)
- Money owed to friends or family
- Some HMRC debts (if a minor proportion)
Cannot be included
- Mortgages and secured loans
- Student loans
- Court fines and criminal penalties
- Child maintenance arrears
- TV licence arrears
- Rent arrears (landlord can still evict)
- Social fund loans
- Debts owed to EU creditors (generally)
Joint debts: If you share a debt with a partner, spouse, or anyone else, the IVA only covers your share of the liability. Your creditors can still pursue the other person for the full outstanding balance. It may be worth exploring whether both parties need a separate debt solution.
Advantages and disadvantages of an IVA
An IVA is one of the most powerful debt solutions available in the UK — but it is not right for everyone. Understanding both sides honestly is essential before you proceed.
Advantages
- Remaining debt is legally written off — often 50–70% of the total balance
- Interest and charges are frozen the moment your IVA is approved
- Creditor contact and enforcement action stops immediately
- You make one affordable monthly payment based on your real budget
- Your home is protected in most cases — you do not have to sell it
- You can continue working normally in most professions
- Once creditors holding 75% by value agree, all creditors are legally bound
- A clear end date — usually five years — with a defined resolution
- IP fees are included in your monthly payment, not paid upfront
Disadvantages
- Recorded on your credit file for 6 years from the start date
- Listed publicly on the Individual Insolvency Register
- Some regulated professions may be affected — check your contract
- If you are a homeowner, a 6-year term applies (vs 5 for non-homeowners)
- Home equity may be reviewed in year 5 of a 5-year IVA
- Windfalls, inheritances, and pay rises must be disclosed to your IP
- If the IVA fails, creditors can resume action — including bankruptcy
- You must adhere strictly to your agreed monthly budget for the full term
Many people find the structure and certainty of an IVA provides significant relief from financial stress.
IVA costs and fees — what will you actually pay?
One of the most common misconceptions about an IVA is that there are large upfront fees to pay. In the vast majority of cases, this is not true. All fees are included within your agreed monthly payment — you pay the same amount each month regardless.
How IP fees work
Your Insolvency Practitioner charges two types of fee, both taken from your monthly contributions rather than billed separately:
- Nominee's fee: Covers the IP's work in preparing your proposal and arranging the creditors' vote. This is typically the first few months of your contributions.
- Supervisor's fee: Covers the ongoing management of your IVA over the term — annual reviews, distributing payments to creditors, and handling any variations.
Average total IP fees: According to the Insolvency Service, the average total cost of an IVA is approximately £3,650. This is deducted from your monthly contributions — your total monthly payment never increases to cover it.
| Fee type | What it covers | When charged |
|---|---|---|
| Nominee's fee | Proposal preparation and creditors' meeting | Early months of IVA |
| Supervisor's fee | Ongoing IVA management over full term | Spread across all payments |
| Disbursements | Admin costs (postage, registrations, etc.) | Included in total |
| Upfront fee | Should be none for a standard consumer IVA | None in most cases |
What about debt management companies?
You do not need a debt management company to set up an IVA. You can approach a licensed Insolvency Practitioner directly, which is generally cheaper. Debt management companies acting as intermediaries often charge additional fees on top of the IP's costs. Always clarify the full fee structure before signing anything.
How does an IVA affect your credit score?
An IVA will have a significant impact on your credit profile — but it is important to understand exactly what that means in practice, and how your situation can improve after the arrangement completes.
During your IVA
- Your IVA is registered on the Individual Insolvency Register, a publicly searchable database maintained by the Insolvency Service.
- Credit reference agencies (Experian, Equifax, TransUnion) update your credit file with the IVA — this typically causes a significant drop in your credit score, often 200–300 points.
- Obtaining new credit, loans, or a mortgage during an active IVA is extremely difficult and generally prohibited under the terms of your arrangement without your IP's consent.
- Opening new bank accounts may be challenging — some banks refuse accounts to people in an active IVA, though basic accounts are typically still available.
After your IVA completes
- Your IVA record remains on your credit file for six years from the date the IVA started — not from the date it completed. This means if you complete a 5-year IVA, there is only one year left on your credit file.
- The IVA entry is removed from the Individual Insolvency Register once it completes.
- Credit rebuilding typically begins immediately after completion. Many people successfully apply for secured credit cards or basic loan products within 12–18 months of finishing their IVA.
- Specialist mortgage lenders may consider applications within 2–3 years of IVA completion, though rates will be higher than standard products.
Important perspective: If you are already missing payments and accumulating defaults, your credit profile is likely already significantly damaged. An IVA provides a structured path to resolution — and while the short-term credit impact is real, it is often no worse than the ongoing defaults you are already accumulating.
Will an IVA affect your home?
This is one of the most important questions for homeowners considering an IVA. The short answer is that your home is generally protected — but there are conditions you need to understand fully.
For homeowners: the equity clause
Under the IVA Protocol, if you own your home with equity of £10,000 or more, your IVA term will be extended to six years rather than five. In the final year, your IP will arrange for your home to be valued and will explore whether you can release some equity (through remortgaging) to make a larger payment to creditors.
If you cannot remortgage — because lenders will not offer you a product, or because releasing equity would increase your monthly payments beyond what is affordable — the equity clause is typically satisfied by an additional 12 months of normal contributions instead. You do not lose your home.
For renters
If you rent your home, the IVA has no direct impact on your tenancy. However, some landlords conduct credit checks when renewing tenancies. If your landlord searches the Insolvency Register or your credit file during your IVA, they may find the entry. Most existing tenancies are unaffected.
Mortgages: Your mortgage is a secured debt and cannot be included in an IVA. You must continue paying your mortgage alongside your IVA contributions — your IP will factor this into your affordability assessment when calculating your monthly payment.
Will an IVA affect your job?
For the vast majority of people, an IVA has no impact on their employment whatsoever. There is no legal requirement to tell your employer, and your IP will not contact them.
When employment may be affected
Certain roles carry contractual or regulatory restrictions that may be triggered by an insolvency arrangement. You should review your employment contract carefully and, if relevant, seek independent advice before proceeding.
- Financial services: Some roles regulated by the FCA or PRA — such as appointed representatives, mortgage advisers, or bank employees with financial authority — may be subject to restrictions.
- Legal professionals: Solicitors and barristers may be subject to restrictions from the Solicitors Regulation Authority or Bar Standards Board.
- Accountants: Members of professional bodies such as ICAEW or ACCA may need to disclose an IVA to their professional body.
- Company directors: You can generally remain a company director during an IVA, unlike bankruptcy — but check your articles of association.
- Public sector: Most civil service and public sector roles are unaffected, but security-cleared positions may involve additional scrutiny.
Self-employed: You can enter an IVA and continue trading while self-employed. Your business debts may be included in the arrangement, and your IP will factor your business income into the assessment. A specialist self-employed IVA may be structured differently to a standard consumer IVA.
IVA alternatives — is there a better option for you?
An IVA is not the only solution, and it is not always the most appropriate one. Understanding how it compares to other options helps you — and your adviser — make the right decision.
| Solution | Debt written off | Income needed | Credit impact | Best for |
|---|---|---|---|---|
| IVA | Yes — remaining balance | Yes — regular income | 6 years | Multiple creditors, regular income, £6k+ debt |
| DMP | No — full balance | Yes — for payments | Variable | Flexible informal option, lower debt levels |
| DRO | Yes — all listed debts | No — low income only | 6 years | Low income, under £30k debt, minimal assets |
| Bankruptcy | Yes — after 12 months | Not required | 6 years | No realistic repayment prospect, larger debts |