Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay affordable amounts towards your debts over a set period of time.
IVAs are designed for people who have unmanageable debt but can afford to make regular payments. If the arrangement is successfully completed, any remaining debt included in the IVA is usually written off.
An IVA is a serious financial commitment and it is important to understand how it works before deciding whether it is the right option for you.
What Is an IVA?
An Individual Voluntary Arrangement is a formal debt solution available in England and Wales.
An IVA allows you to make affordable repayments based on your income and household expenses.
The arrangement is managed by a qualified insolvency practitioner, who acts as the supervisor of the IVA.
Once approved, the IVA becomes legally binding on both you and the creditors included in the arrangement.
Who Might Consider an IVA?
An IVA may be suitable if:
- You have debts that you cannot repay in full.
- You can afford to make regular monthly payments.
- You have a reliable source of income.
- You want a formal alternative to bankruptcy.
- You are looking for protection from creditor action.
Every situation is different, so professional debt advice should always be sought before deciding on an IVA.
Which Debts Can Be Included?
An IVA can often include:
- Credit cards.
- Personal loans.
- Overdrafts.
- Store cards.
- Catalogue debts.
- Payday loans.
- Utility arrears.
- Council Tax arrears.
- Some benefit overpayments.
Most unsecured debts can usually be included.
Which Debts Are Not Usually Included?
Certain debts are generally excluded, including:
- Child maintenance arrears.
- Criminal fines.
- Student loans.
- Court compensation orders.
- Certain debts arising from fraud.
You will normally remain responsible for any debts that cannot be included.
How Does an IVA Work?
The process usually involves:
1. Reviewing Your Finances
An insolvency practitioner will assess:
- Your income.
- Household expenses.
- Assets.
- Debts.
- Financial circumstances.
2. Preparing a Proposal
A repayment proposal is prepared based on what you can realistically afford.
3. Creditor Approval
Creditors are asked to vote on the proposal.
If sufficient creditor approval is received, the IVA becomes legally binding.
4. Making Regular Payments
You make agreed payments for the duration of the arrangement.
The payments are then distributed among your creditors.
How Long Does an IVA Last?
Most IVAs last around five years, although some arrangements may continue for longer depending on individual circumstances.
During this period you are expected to:
- Make agreed payments on time.
- Cooperate with annual reviews.
- Report significant changes in circumstances.
What Happens to Interest and Charges?
Once the IVA is approved:
- Interest is usually frozen on included debts.
- Additional charges are generally stopped.
- Creditors cannot normally pursue separate recovery action for debts included in the arrangement.
This can help make the debt more manageable.
What If My Circumstances Change?
Life circumstances can change during an IVA.
You should inform your insolvency practitioner about changes such as:
- Changes in income.
- Changes in employment.
- Changes in household circumstances.
- Receiving a lump sum of money or inheritance.
Your IVA may be reviewed to ensure the arrangement remains appropriate.
What Happens If I Complete the IVA?
If you successfully complete the arrangement:
- Any remaining included debt is usually written off.
- Creditors can no longer pursue those debts.
- You will receive confirmation that the IVA has been completed.
Many people view completion as an opportunity for a fresh financial start.
What Happens If the IVA Fails?
An IVA can fail if:
- Payments are missed without agreement.
- The terms of the arrangement are not followed.
- Significant circumstances change and the IVA cannot continue.
If an IVA fails:
- Creditors may be able to restart recovery action.
- Interest and charges may be reapplied.
- Alternative debt solutions may need to be considered.
It is important to seek advice if you are struggling to maintain payments.
How Will an IVA Affect My Credit Rating?
An IVA will affect your credit file.
This may make it more difficult to:
- Obtain credit.
- Take out a mortgage.
- Access certain financial products.
The IVA will remain on your credit file for a period of time after it begins.
What Are the Advantages of an IVA?
An IVA may:
✅ Provide a structured repayment plan
✅ Freeze interest and charges on included debts
✅ Protect you from creditor action
✅ Allow you to repay affordable amounts
✅ Write off remaining included debt when completed
✅ Freeze interest and charges on included debts
✅ Protect you from creditor action
✅ Allow you to repay affordable amounts
✅ Write off remaining included debt when completed
For some people, an IVA provides a manageable alternative to bankruptcy.
What Are the Disadvantages of an IVA?
An IVA can:
❌ Affect your credit rating
❌ Last for several years
❌ Require regular financial reviews
❌ Restrict access to future credit
❌ Fail if payments become unaffordable
❌ Last for several years
❌ Require regular financial reviews
❌ Restrict access to future credit
❌ Fail if payments become unaffordable
It's important to fully understand the implications before proceeding.
Are There Alternatives to an IVA?
Depending on your circumstances, alternatives may include:
- Breathing Space.
- Debt Management Plans (DMPs).
- Debt Relief Orders (DROs).
- Bankruptcy.
- Informal repayment arrangements.
A debt advisor can help you compare all available options and identify the most suitable solution for your circumstances.
Is an IVA Right for Me?
An IVA may be worth considering if:
- You have significant unsecured debts.
- You can afford regular repayments.
- You want a formal debt solution.
- Bankruptcy may not be suitable for your situation.
Professional debt advice should always be obtained before entering into any formal insolvency arrangement.
Need Help?
- Understand whether an IVA is suitable for your circumstances.
- Review your income, expenditure and debts.
- Compare all available debt solutions.
- Check your benefit entitlement.
- Access free, confidential debt advice.
Contact our team for free, confidential advice and support.