IVA Advice: How Individual Voluntary Arrangements Work

What people typically want to know about IVAs

Most people searching for IVA advice are weighing up whether an Individual Voluntary Arrangement is a realistic route out of unmanageable debt — and what the trade-offs are. The Insolvency Service reported 49,886 IVAs in England and Wales in 2023, making it one of the most common formal debt solutions in the UK. The information below explains how IVAs work, who can use one, what they cost, and what alternatives exist.

An IVA is a legally binding agreement between a person and their creditors to pay back a proportion of what is owed over a fixed period — usually five or six years. It is set out in Part VIII of the Insolvency Act 1986 and can only be set up and supervised by a licensed Insolvency Practitioner (IP).

How an IVA works in practice

An IVA is a formal proposal made to creditors. The person in debt works with a licensed Insolvency Practitioner to draft a proposal setting out how much they can afford to pay each month after reasonable living costs are taken into account. That proposal is then put to creditors for a vote.

The approval threshold

According to GOV.UK, the IVA is approved if creditors holding 75% by value of those who vote agree to it. Once approved, the arrangement binds all unsecured creditors included in the proposal — even those who voted against it or did not vote at all.

What happens during the IVA

Monthly contributions are paid to the Insolvency Practitioner, who distributes the money to creditors after deducting their fees. Interest and charges on the included debts are frozen at the date the IVA is approved. Creditors cannot pursue further legal action or contact the debtor directly about the debts in the arrangement.

An annual review is carried out to check whether the contribution is still affordable and whether income has changed. If circumstances change significantly — for example, redundancy or serious illness — the IP can apply to vary the IVA, extend the term, or in some cases propose early closure.

Who can use an IVA

There is no statutory minimum debt level for an IVA, but in practice most IPs will only take on cases where the debts are large enough to justify the process. Common eligibility points include:

• Living in England, Wales or Northern Ireland (Scotland has a separate equivalent called a Trust Deed)
• Having unsecured debts that cannot realistically be repaid in a reasonable timeframe
• Having some level of disposable income, lump sum, or assets to offer creditors
• Multiple creditors — IVAs are rarely used for a single debt

Debts commonly included in an IVA cover credit cards, personal loans, overdrafts, catalogue debt, payday loans, store cards, some HMRC debts, council tax arrears (with conditions), and certain benefit overpayments. Some debts cannot be included — student loans, child maintenance arrears, court fines, and secured debts such as mortgages.

What an IVA costs

IVA fees are paid out of the monthly contributions, not on top of them. Two main fees apply: a nominee's fee for drafting the proposal and putting it to creditors, and a supervisor's fee for running the IVA across its term. These are agreed by creditors as part of the vote and disclosed in the proposal document.

The total cost varies but typically takes up several months of the early contributions before money starts reaching creditors. Anyone considering an IVA can ask the IP for a clear breakdown of fees before signing anything. The Insolvency Practitioners Association and the FCA both regulate aspects of how IVAs are marketed and sold.

Advantages and trade-offs

What an IVA can do

• Freeze interest and charges on included debts
• Combine multiple debts into one affordable monthly payment
• Protect a home from being forced into sale, in most cases
• Write off the remaining balance of included debts at the end of the term
• Stop further creditor contact and legal action on included debts

The trade-offs

• The IVA is recorded on the Individual Insolvency Register while it is active
• It appears on credit files for 6 years from the start date, affecting access to credit
• Homeowners may be required to release equity in year 5 — typically up to 85% loan-to-value
• Failure to keep up with contributions can lead to the IVA being terminated, which may then lead to bankruptcy
• Some professions and tenancy agreements have restrictions for people in an IVA

How an IVA compares to other formal options

An IVA is one of several formal debt solutions in England and Wales. The others include Debt Relief Orders (DROs), bankruptcy, and informal arrangements such as Debt Management Plans (DMPs).

IVA vs DRO

A DRO is designed for people with low income, low assets, and debts under £50,000 (the limit was raised in June 2024). DROs cost nothing to apply for since the £90 fee was scrapped, but they have strict eligibility criteria. An IVA has no upper debt limit and is more suitable for people with some disposable income.

IVA vs bankruptcy

Bankruptcy currently costs £680 to apply for in England and Wales and typically lasts 12 months before discharge. It is faster than an IVA but can have a greater impact on assets, including the family home in some cases. An IVA may protect equity in a property that bankruptcy would not.

IVA vs DMP

A DMP is an informal arrangement, not a legal one. It does not freeze interest unless creditors voluntarily agree, and there is no fixed end date. It also does not write off debt. An IVA is binding once approved and has a defined end point.

Where regulated IVA advice comes from

Only a licensed Insolvency Practitioner can set up an IVA. Anyone marketing IVAs in the UK must comply with FCA rules on debt advice (CONC 8) and the Insolvency Service's guidance on IVA conduct. Free debt advice from the charity sector can help someone understand whether an IVA, a DRO, bankruptcy, a DMP, or no formal solution at all is the most realistic route for their situation.

The Insolvency Service publishes IVA statistics quarterly, including approval rates, average contribution levels, and the proportion of IVAs that complete successfully versus those that fail. According to the most recent figures, around three-quarters of IVAs that started in 2018 had either completed or were still on track by year five — but a significant minority failed, often because of income changes.

Common questions

Can an IVA be cancelled?

An IVA can be terminated if contributions are missed or if circumstances change drastically. Termination usually means creditors can resume collection on the original debts plus any frozen interest, and bankruptcy may follow.

Will an IVA affect a partner?

An IVA is an individual arrangement and does not directly affect a partner's credit file. However, joint debts will still affect the partner, and household income is considered when calculating affordability.

What happens at the end?

If all contributions are made and the IP issues a completion certificate, the remaining balance of included unsecured debts is written off. The IVA stays on the Individual Insolvency Register for three months after completion and on credit files for six years from the start date.