What Is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement (IVA) is a formal, legally binding insolvency procedure available in England, Wales, and Northern Ireland. It is governed by the Insolvency Act 1986 and provides a structured way to repay a proportion of your unsecured debts over a fixed period — typically 5 years — with any remaining qualifying debt written off at the end.
An IVA is proposed by a licensed Insolvency Practitioner (IP), who acts as your nominee and, once approved, becomes your supervisor. At least 75% of your creditors by value must vote to approve the IVA at a creditors' meeting (now typically done by correspondence). Once approved, all creditors — including those who voted against — are legally bound by the terms.
How the IVA Process Works
- Free debt advice: Speak to StepChange, National Debtline, or Citizens Advice first to confirm an IVA is the right solution.
- Find a licensed Insolvency Practitioner (IP): Your IP will review your income, expenses, assets, and debts. They prepare a proposal that creditors will vote on.
- Income and expenditure assessment: Your IP uses the Common Financial Statement (CFS) to calculate what you can afford to pay each month after essential living costs.
- Proposal sent to creditors: Creditors are given the IVA proposal and invited to vote. They have 14 days to respond. 75% by value must approve.
- IVA approved and supervised: Once approved, your IP becomes your supervisor. You make monthly payments for 5 years. The IP distributes payments to creditors after deducting their fees.
- Completion: After 5 years of successful payments, any remaining qualifying unsecured debt is legally written off and you receive a completion certificate.
Who Is Eligible for an IVA?
- You live in England, Wales, or Northern Ireland (Scotland has the Protected Trust Deed)
- You have at least £6,000–£10,000 of unsecured debt (most IPs require this minimum)
- You owe money to at least two creditors
- You have a regular income and can make consistent monthly payments
- You cannot reasonably repay all your debts within a sensible timeframe using a DMP
IVA Costs — What You Really Pay
IVA fees are built into your monthly payment — you do not pay them separately on top. The IP takes their fees from the pot before distributing funds to creditors. Typical fee structure:
- Nominee fee: £1,000–£2,500 — covers preparation of the proposal
- Supervisor's fee: 15–20% of all monies distributed — ongoing management fee
- Disbursements: Insurance, agent fees, postage — usually £300–£500 total
- Total fees over a 5-year IVA: typically £3,000–£5,000
This means creditors receive less than 100p in the pound, and any shortfall is written off at the end. The fees are regulated by the IP's licencing body.
What Debts Can Be Included in an IVA?
An IVA covers unsecured debts:
- Credit cards and store cards
- Personal loans and bank loans
- Overdrafts
- HMRC debts (income tax, VAT, National Insurance)
- Payday loans and catalogue debts
- Benefit overpayments (in most cases)
An IVA does NOT cover:
- Mortgage or secured loans
- Student loans
- Court fines and criminal confiscation orders
- Child maintenance arrears
- TV licence fines
Protected Income: What the IP Allows You to Keep
The IP uses the Common Financial Statement (CFS) to assess your income and expenditure. They allow for reasonable essential living costs including:
- Mortgage or rent payments
- Council tax and utilities
- Food and groceries
- Transport to work
- Clothing and household maintenance
- Childcare costs
- Medical and dental costs
The amount left after these essential costs is your disposable income, which becomes your IVA monthly payment.
IVA and Your Home
One of the most important considerations for homeowners entering an IVA is the equity clause. Typically, in year 4 or 5 of the IVA, you are required to obtain a mortgage valuation. If your home has equity (the difference between its value and any secured loans), you may be required to remortgage to release a portion of that equity for your creditors — usually up to 85% loan-to-value.
If you cannot remortgage (due to poor credit, age, or insufficient equity), the IVA is typically extended by 12 months instead. If there is no equity or negative equity, this clause does not apply.
Renters are not affected by this clause at all.
IVA — The Public Record
All IVAs are recorded on the Individual Insolvency Register, a publicly searchable database at gov.uk/search-the-insolvency-register. Your name, address, IVA date, and status are visible to anyone who searches. This can have implications for:
- Certain employment (especially in financial services, legal, and some public sector roles)
- Obtaining professional licences or memberships
- Business partnerships or directorships
Your name is removed from the register 3 months after the IVA completes successfully.
IVA Credit Impact
An IVA will appear on your credit file for 6 years from the date it is approved. During this time, you will be unlikely to obtain most mainstream credit products. However, once the IVA completes and the 6-year period expires, you can begin rebuilding your credit score — often using credit builder cards and the steps outlined in our Credit Score Improvement Guide.
What If My IVA Fails?
If you miss payments and cannot maintain your IVA, your supervisor may issue a Certificate of Termination, failing the IVA. At this point:
- Creditors regain the right to chase you for the full original debts
- Your IP or creditors may petition for bankruptcy
- The IVA failure is also recorded on your credit file
If your circumstances change temporarily, contact your IP immediately. Most supervisors will try to vary the IVA terms — reducing payments temporarily or adding missed payments to the end — rather than fail the IVA.
IVA vs DMP vs Bankruptcy vs DRO
| Factor | IVA | DMP | Bankruptcy | DRO |
|---|---|---|---|---|
| Legally binding | Yes | No | Yes | Yes |
| Debt written off | Yes (at end) | No | Yes | Yes (after 12m) |
| Public register | Yes | No | Yes | Yes |
| Asset risk (home) | Equity clause | None | High | None |
| Duration | 5–6 years | 5–10 years | 12 months | 12 months |
| Minimum debt | ~£6,000 | None | None | Up to £30,000 |
| Max assets | No limit | No limit | No limit | £2,000 |
| Cost | £3,000–£5,000 (built in) | Free | £680 | £90 |
| Credit impact | 6 years | 6 years | 6 years | 6 years |
| Scotland equivalent | Protected Trust Deed | DMP | Sequestration | LILA/MAP |
Scotland: Protected Trust Deed
If you live in Scotland, an IVA is not available to you. The equivalent is a Protected Trust Deed (PTD), which works similarly but has some differences:
- Duration: 4 years (not 5)
- Managed by a Trustee (not an IP)
- Creditors have 5 weeks to object
- If over half by value object, it cannot be protected
- Appears on the Register of Insolvencies in Scotland
Get Free Advice Before Choosing an IVA
Before committing to an IVA, always seek free advice from a regulated debt charity. Some commercial IVA firms are incentivised to recommend IVAs even when they are not in your best interest — because they earn fees from running them.
Free, impartial advice is available from:
- StepChange Debt Charity — stepchange.org
- National Debtline — nationaldebtline.org
- Citizens Advice — citizensadvice.org.uk
- MoneyHelper — moneyhelper.org.uk (government-backed)