An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between an individual and their creditors to repay outstanding debts in a structured way. IVAs are a popular debt solution in the UK, offering an alternative to bankruptcy for people struggling with unmanageable debt.
In this guide, we’ll explain how IVAs work, their benefits and risks, who qualifies, and alternative debt solutions.

How Does an IVA Work?
An IVA is set up by an insolvency practitioner (IP), who works with you to assess your financial situation and propose a repayment plan to your creditors. If at least 75% (by debt value) of your creditors agree, the IVA becomes legally binding, and all included creditors must adhere to the agreement.
Steps to Setting Up an IVA
Consultation with an Insolvency Practitioner – They will assess your debts, income, and expenses.
Proposal Submission – The IP drafts a repayment proposal based on your financial capacity.
Creditor Meeting & Approval – Creditors vote on the IVA; if approved, it becomes legally binding.
Monthly Repayments Begin – You make one affordable payment each month.
Completion & Debt Write-Off – After the agreed period (usually 5–6 years), any remaining debt is written off.
Who Can Apply for an IVA?
An IVA is typically suitable for individuals who:
Owe at least £5,000–£10,000 in unsecured debts (credit cards, loans, overdrafts, etc.).
Have at least two or more creditors.
Can afford regular repayments (usually £80+ per month).
Are struggling with debt but want to avoid bankruptcy.
Who May Not Qualify?
An IVA may not be the best option if:
You have low or unstable income, making it difficult to maintain repayments.
The majority of your debts are secured debts (e.g., mortgage, car finance, secured loans).
You owe less than £5,000, where alternative solutions may be better.
Pros and Cons of an IVA
Advantages of an IVA
Debt Reduction – Any remaining debt is written off at the end of the IVA.
Fixed Monthly Payments – Predictable and manageable repayments.
Legal Protection – Creditors cannot take further legal action or harass you for payments.
No Asset Seizure – Unlike bankruptcy, you typically keep your home and car.
Interest & Charges Frozen – Prevents further accumulation of debt.
Disadvantages of an IVA
Long-Term Commitment – Most IVAs last five to six years.
Strict Budgeting – Any extra income may need to go towards debt repayment.
Impact on Credit Score – An IVA remains on your credit file for six years, affecting future borrowing.
Risk of Failure – Missing payments can lead to IVA termination, leaving you liable for full debt repayment.
Limited Access to Credit – You may need approval from the IP before taking on new credit.
What Debts Can and Cannot Be Included in an IVA?
Debts That Can Be Included:
Credit cards
Personal loans
Overdrafts
Payday loans
Council tax arrears
Utility bill arrears
Debts That Cannot Be Included:
Secured debts (mortgages, car finance)
Court fines and criminal penalties
Student loans
Child maintenance payments
How an IVA Affects Your Life
Employment & Career
Most jobs are not affected, but some financial roles (e.g., accountants, solicitors) may have restrictions.
Renting & Homeownership
Renting – Some landlords may check credit reports before renting to you.
Homeowners – You may need to release home equity if possible.
Bank Accounts & Savings
You may need to switch to a basic bank account.
Savings are typically used to repay debts.
Alternatives to an IVA
An IVA is just one of many debt solutions available. Consider these alternatives:
🔹 Debt Management Plan (DMP) – A non-legally binding repayment plan.
🔹 Debt Relief Order (DRO) – Suitable for low-income individuals with little to no assets.
🔹 Bankruptcy – A legal process that clears most debts but may involve asset repossession.
🔹 Debt Consolidation Loan – Combining multiple debts into one loan with a lower interest rate.
🔹 Snowball or Avalanche Method – Self-managed strategies for paying off debts.
FAQs About IVAs
1. Will an IVA Affect My Credit Score?
Yes, an IVA stays on your credit report for six years, making borrowing difficult.
2. Can Creditors Reject My IVA Proposal?
Yes, but if 75% of creditors (by debt value) agree, it becomes legally binding for all included creditors.
3. What Happens If I Miss a Payment?
Missed payments could result in IVA termination, reinstating your full debt.
4. Can I Pay Off My IVA Early?
Yes, if you receive a lump sum or extra funds, you can settle early with creditor agreement.
5. Will I Lose My Home in an IVA?
No, but if you own property, you may be required to release equity to contribute towards repayments.
6. Can I Get a Mortgage After an IVA?
Yes, but you may need to wait until the IVA is removed from your credit file (after six years) and improve your credit score.
Final Thoughts
An IVA can be a lifeline for individuals struggling with unmanageable debt, providing structured repayments and eventual debt relief. However, it’s a long-term commitment with serious financial implications. Before committing to an IVA, consider alternative solutions and seek professional financial advice to determine the best option for your situation.
If you’re struggling with debt, speaking to a licensed insolvency practitioner or debt adviser can help you make an informed decision.
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