What Is an IVA and How Does It Work?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors, regulated by the Insolvency Service, that allows you to repay what you can afford over five to six years with the remaining unsecured debt written off at the end. IVAs are managed by Licensed Insolvency Practitioners and protect your home and assets while freezing all interest, charges, and creditor contact.
Last Updated: January 2025
Your complete guide to Individual Voluntary Arrangements in the UK. Discover how an IVA can help you write off unaffordable debt and get a fresh financial start.
Reviewed by FCA-regulated debt advisors | Partnered with UK Insolvency Service regulated advisors
Check Your EligibilityWhat is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. It's a type of insolvency, approved by the court and regulated by the UK Insolvency Service, and is designed for people with regular income who can't afford to repay their unsecured debts.
With an IVA, you make affordable monthly payments, typically for 5-6 years. Any remaining unsecured debt is then written off. Throughout the IVA, your creditors are legally forbidden from taking further action against you.
Legally Binding
Once approved, creditors included in the IVA cannot chase you for payment.
Fixed Term
Typically lasts for 60 months (5 years), after which remaining debt is written off.
Debt Write-Off
A significant portion of your unsecured debt (often up to 80%) can be written off.
How Does an IVA Work? The 5-Step Process
- Initial Consultation: You speak with a qualified debt advisor. They will assess your financial situation (income, expenses, debts) to see if an IVA is your best option.
- Proposal Creation: If an IVA is suitable, an Insolvency Practitioner (IP) will work with you to draft a proposal to your creditors. This details your proposed monthly payment.
- Creditors' Meeting: The proposal is sent to your creditors, who vote on whether to accept it. For the IVA to be approved, creditors representing 75% of your debt value must agree.
- IVA is Active: Once approved, the IVA is legally binding. You make your single monthly payment to your IP, who distributes it to your creditors. All interest and charges are frozen.
- Completion: After the agreed term (usually 5 years), and having met all obligations, your IVA is complete. Any remaining unsecured debt is written off, and you are debt-free.
Pros and Cons of an IVA
Advantages
- Write off a large portion of your debt.
- Creditors are legally stopped from contacting you.
- Interest and charges on your debts are frozen.
- You make one single, affordable monthly payment.
- It allows you to protect key assets like your home.
Disadvantages
- Your credit rating will be negatively affected for 6 years.
- Your name will be on the public Insolvency Register.
- If you are a homeowner, you may need to release equity from your property.
- There are restrictions on your spending during the IVA.
- If you fail to keep up payments, your IVA could fail and creditors could make you bankrupt.
Am I Eligible for an IVA?
While every case is different, you generally need to meet the following criteria to qualify for an IVA under UK insolvency law:
- Have at least £6,000 of unsecured debt.
- Owe money to two or more creditors.
- Have a regular, reliable income (from employment, benefits, etc.).
- Be able to afford a monthly payment of at least £80 after essential living costs.
- Live in England, Wales, or Northern Ireland.
The best way to know for sure is to complete our free and confidential eligibility check. Our advisors work with FCA-regulated partners to ensure you receive appropriate advice. You can verify the regulatory status of debt advice firms via the FCA Register.
Impact on Your Life
Credit Rating
An IVA will be recorded on your credit file for 6 years from the start date. During this time, it will be difficult to obtain credit. After it's removed, you can start rebuilding your credit score.
Your Home & Assets
An IVA is designed to help you avoid bankruptcy and protect your assets. If you're a homeowner with equity, you may be required to remortgage in the final year to release some funds for your creditors. Your car is usually safe if it's of a reasonable value.
Employment
Most jobs are unaffected by an IVA. However, some professions (like accountancy, law, or financial services) may have restrictions. It's important to check your employment contract.
Frequently Asked Questions About IVAs
What is an IVA and how does it work?
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay your debts over a fixed period, typically 5-6 years. It's approved by the court and regulated by the UK Insolvency Service. You make one affordable monthly payment to a licensed Insolvency Practitioner (IP), who distributes it to your creditors. Once 75% of your creditors (by debt value) agree to the proposal, all creditors are bound by it. Interest and charges are frozen, and creditors cannot take further action against you. After completing the agreed term, any remaining unsecured debt included in the IVA is written off, giving you a fresh financial start.
How much debt do I need for an IVA?
Generally, you need at least £6,000 of unsecured debt to qualify for an IVA in England, Wales, or Northern Ireland. You also need to owe money to two or more creditors and have a regular income that allows you to make monthly payments of at least £80-£100 after your essential living expenses. The debt must be unsecured, meaning debts like credit cards, personal loans, overdrafts, store cards, and payday loans. Secured debts like mortgages or car finance cannot be included in an IVA. If you have less debt or different circumstances, other debt solutions like a Debt Management Plan (DMP) or Debt Relief Order (DRO) might be more suitable. For detailed information on all debt solutions, visit GOV.UK's debt advice page.
Can I keep my house with an IVA?
Yes, one of the key advantages of an IVA is that it's designed to help you keep your home, unlike bankruptcy where your property may be sold. However, if you're a homeowner with equity in your property, you may be required to remortgage in the final year of your IVA (typically year 5) to release some of this equity to pay your creditors. If remortgaging isn't possible due to poor credit or other reasons, your IVA term may be extended by 12 months instead. Your monthly mortgage or rent payments are considered essential expenses and are protected. The key is that an IVA aims to keep you in your home while helping you manage your debts, which is why it's often preferred over bankruptcy by homeowners.
What's the difference between an IVA and bankruptcy?
While both IVAs and bankruptcy are forms of insolvency regulated by The Insolvency Service, there are significant differences. An IVA is a voluntary agreement where you propose a repayment plan to creditors and continue making affordable payments for 5-6 years. It's designed to protect assets like your home. Bankruptcy, on the other hand, usually results in most of your valuable assets being sold to pay creditors, and you're typically discharged after 12 months, though the credit record stays for 6 years. An IVA costs around £5,000-£6,000 in fees (paid from your monthly contributions), while bankruptcy fees start at £680 upfront. An IVA is less severe on your employment prospects and allows more control, but bankruptcy may be quicker if you have no assets. Both appear on the public Insolvency Register and affect your credit rating for 6 years.
How much will my IVA payments be?
Your IVA payment amount is calculated based on your individual financial circumstances - specifically, your income minus your essential living expenses (known as your 'disposable income'). Typically, payments range from £80 to £200+ per month, but this varies greatly depending on your situation. Your Insolvency Practitioner will complete a detailed income and expenditure assessment with you, using guidelines from the Standard Financial Statement (SFS) to determine what's affordable and reasonable. Essential costs like mortgage/rent, council tax, utilities, food, and transport are protected. The payment must be sustainable for the 5-6 year term, so it's set at a level you can genuinely afford. If your circumstances change during the IVA (e.g., job loss, pay rise), your payment can be reviewed and adjusted accordingly.
What happens if my IVA fails?
If you persistently fail to make payments, your Insolvency Practitioner may terminate your IVA. Once terminated, you lose the legal protection it provided — creditors can resume interest, charges, and collection action, and the full original debt becomes payable again. In some cases, creditors may petition for your bankruptcy. However, your IP will typically work with you to find a solution before termination, such as a payment break or variation to your IVA terms, if your income has genuinely dropped. According to the Insolvency Service, approximately 40% of IVAs do not complete to their full term (Insolvency Service Annual Statistics, 2024).
Will an IVA affect my job or career?
For most people, an IVA will not affect their employment. However, certain professions have restrictions — including solicitors, accountants, financial advisors, police officers, and some military and civil service roles. These professions may have codes of conduct that require disclosure of insolvency arrangements. If you are unsure whether your career could be affected, check with your professional body or employer before entering an IVA. Self-employed individuals can continue to trade during an IVA.
How is an IVA different from a Debt Management Plan (DMP)?
The key difference is that an IVA is a legally binding agreement overseen by the court and managed by a Licensed Insolvency Practitioner, while a DMP is an informal, voluntary arrangement that either you or a debt management company negotiates directly with creditors. An IVA freezes interest and charges, prevents creditor legal action, and writes off remaining debt at the end. A DMP does not guarantee that creditors will freeze interest or accept reduced payments, and you remain liable for the full amount. However, a DMP is more flexible — you can increase, decrease, or stop payments at any time without legal consequences.
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Check My Eligibility NowEditorial Statement: This content has been prepared in accordance with FCA guidelines and reviewed against guidance published by The Insolvency Service and MoneyHelper. YourFinances.co.uk connects consumers exclusively with Licensed Insolvency Practitioners regulated by the IPA, ICAEW, and ACCA. We do not provide regulated financial advice ourselves. Debt solutions may affect your credit rating. Last reviewed Week commencing January 2026.