An Individual Voluntary Arrangement (IVA) can help some people deal with debts they cannot repay, but it is a form of insolvency with fees, restrictions and a lasting effect on credit. Whether it is suitable depends on your finances and the alternatives available.
MoneyNerd provides general information and introductions to The Debt Advice Service. We do not provide debt advice or recommend a debt solution. This guide focuses on England and Wales; different rules apply elsewhere in the UK.
What is an IVA?
An IVA is a legally binding arrangement with creditors, set up and supervised by a licensed insolvency practitioner. It sets out what you will pay and which debts it covers. Approval normally requires at least 75% by value of the creditors who vote to support the proposal, subject to the voting rules.
Payments are based on an assessment of income, reasonable household costs and assets. Fees are deducted before money is distributed to creditors. Remaining included debts are released only when you successfully meet the arrangement’s terms. Read our guide to how IVAs work.
When might an IVA be considered?
A debt adviser should compare an IVA with other options before you commit. A sustainable payment matters more than a headline debt-write-off figure. An IVA may be unsuitable if your disposable income is very low, your income mainly comes from benefits, you qualify for a Debt Relief Order, or you could repay debts through a Debt Management Plan over a similar period.
Do not assume a minimum debt figure in an advert means you qualify. An insolvency practitioner must assess your circumstances and explain why the proposal is appropriate.
Which debts can be included?
Many unsecured debts can be included, such as personal loans, credit cards and overdrafts. Some tax debts and household arrears can also be included. It is incorrect to say that all HMRC debts or rent arrears are automatically excluded.
Student loans, court fines and maintenance obligations are generally excluded. Secured creditors’ rights cannot normally be changed without their agreement. Keep up with ongoing priority commitments, including rent, mortgage payments, council tax and essential bills. Housing arrears and debts owed abroad need specific advice. Ask the practitioner for a written explanation of which debts remain payable outside the IVA.
How long does an IVA last, and what happens to home equity?
Under the 2025 IVA Protocol, the usual proposed term is five years, or six where your individual beneficial interest in the family home reaches £10,000 under the protocol calculation. That calculation uses 85% of the property’s value, deducts secured borrowing and takes account of your ownership share.
The 2025 protocol does not require you to remortgage or release equity from your family home. Being a non-homeowner does not automatically mean paying for a sixth year. Older arrangements and bespoke IVAs can have different terms, including equity provisions, so check your own proposal with your supervisor.
Payment breaks, agreed changes or unmet obligations can extend an arrangement. Completion depends on fulfilling all the agreed terms, not simply reaching a calendar anniversary.
What are the benefits and risks?
An approved IVA can provide a structured payment arrangement, restrict enforcement by creditors bound by it and release unpaid included debts on successful completion. It does not deal with every debt or protect another person who is jointly liable.
- Fees reduce the amount of your payments that reaches creditors. Ask for the full fee breakdown before agreeing.
- Your credit record is affected, making borrowing and some tenancy applications more difficult.
- The IVA appears on a public insolvency register. Check employment contracts and professional rules for any disclosure requirements.
- You must follow the agreed budget and report relevant changes in income, assets and circumstances. Extra income or an inheritance may need to be paid into the IVA.
- If it fails, creditors may resume recovery, add interest and charges, or pursue bankruptcy. Fees already paid are not normally refunded.
What about my home, car, work and everyday spending?
The proposal must explain how assets and reasonable living costs will be treated, including transport, disability and caring costs. Do not assume an expensive vehicle, holiday, gift or new borrowing is automatically permitted. Ask your supervisor how the terms apply before making a commitment.
An IVA does not automatically prevent you from working, but restrictions can arise in particular roles or contracts. Check the requirements that apply to your job. An IVA also does not prevent all creditor correspondence: statements and other required notices may still arrive.
How long will it affect my credit file?
An IVA normally remains on your credit file for six years from its start date, and may remain longer if it has not finished. Check that the record is updated correctly after completion. Answer lenders’ questions accurately, including questions about past insolvency after it no longer appears on your report.
What if I cannot pay or want to finish early?
Contact your supervisor as soon as payments become difficult. A payment break, reduced contribution or variation may be possible, depending on the terms and any creditor approval needed. Do not rely on a supposed allowance of missed payments.
Early settlement may be possible if creditors accept a variation, but receiving a lump sum does not automatically let you end the IVA on your own terms. Ask how the money must be treated before using it.
How can I compare the alternatives?
Options may include an affordable arrangement with creditors, a fee-free Debt Management Plan, a Debt Relief Order or bankruptcy. Each has different eligibility rules, costs and consequences. Scotland has its own solutions. A qualified debt adviser can compare these using your income, debts, assets and household needs.
You can find free debt advice through MoneyHelper. If you use MoneyNerd’s enquiry form, we introduce you to The Debt Advice Service for free debt advice. MoneyNerd may receive a fee if you proceed with a debt solution through them. Some solutions have fees and can negatively affect your credit rating.
Sources
Insolvency Service: IVA Protocol 2025; protocol IVA key facts; National Debtline: individual voluntary arrangements.
