What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement, or IVA, is a legally binding contract between you and those you owe money to that allows you to pay off a portion of your debt over a fixed period of time – usually five years.

Designed as a way of helping people avoid bankruptcy, IVAs are available to those living in England, Wales and Northern Ireland. If approved, all interest and charges will be frozen on the debts included, protecting you and your home from any legal or enforcement action. Lenders that are included are also unable to pursue you for any outstanding amounts for the duration of the arrangement.

Your payments will be based on what you can afford to pay and once you have completed the arrangement, any remaining balances will be written off.

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What will an IVA cost me?

Regardless of what company you set up your IVA with, there will generally be costs and fees included. However, these are usually built into your monthly payments and you are not required to pay these upfront.

When you enter an IVA, your lenders are, put simply, agreeing to receive a lesser amount in order for your Insolvency Practitioner (IP) to be paid to administer your arrangement. This means that even if there were no fees at all, your payments would remain the same amount as it will be calculated as being affordable to you – lenders would simply get a better return.

IVA advantages and disadvantages

There are pros and cons to almost everything in life – including an IVA. As such, we’ve listed these below for you:


  • Your payments are affordable and easy to maintain
  • An IVA is legally binding, and, if approved, all lenders are bound to it regardless of whether they vote against it or not
  • You can keep your house and will never be obligated to sell it
  • Interest and charges are frozen for the duration of the arrangement
  • Lenders cannot take any legal action against you or pursue you whilst you are in the IVA
  • Your arrangement will be run by your Insolvency Practitioner (IP) who will deal with your lenders on your behalf
  • There are options that you can take to help if your circumstances change
  • Any balances remaining at the end of the arrangement will be written off


  • You’ll need to stick to a strict budget and be disciplined with your money when in the IVA
  • A record of your arrangement will be posted on the Insolvency Register and your credit file for six years, which will have an effect on your credit rating and make borrowing harder to do
  • If you own your home, you may be asked to release any available equity towards the end of your IVA, which may cause it to be extended by 12 months
  • Should you come into any money during your IVA, the funds may be brought into the arrangement to help pay back more of your debts.
  • It can potentially affect your job depending on what sector you work in
  • If you don’t comply with the terms and conditions of your IVA, it may be terminated, and you will become fully responsible for your debts again

Will an IVA affect my credit rating?

Unfortunately, if you enter an IVA it will affect your credit rating. This is because your arrangement will be noted on the Insolvency Register, where it will stay until it has been completed.

This will then be put as a marker on your credit report for a total of six years (a year after you have finished the IVA), which will bring your score down.

However, when you look at this in context, your score will already be on the lower end of the scale from being in debt in the first place, especially if you have been defaulting on payments.

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What debts can be put into an IVA?

You can include most unsecured debts in an IVA, which includes:

  • Overdrafts
  • Credit cards
  • Payday loans
  • Utility bills
  • Bank loans
  • Catalogues/store cards

There are certain debts that you cannot put into your IVA, such as:

  • Mortgage/secured loan arrears
  • Court fines
  • TV licence arrears
  • Hire purchase agreements
  • Student loans
  • Child support arrears
  • Social fund loans

You will be able to include joint debts in an IVA, but the other party named on the debt will remain liable for the balance outstanding and can still be pursued. If you have joint debts, it may be worth considering entering a joint IVA to cover you both.

The IVA process

From the beginning to the end, an IVA is quite a journey – so to make it that little bit easier to digest, we’ve mapped it out below for you:

Initial chat

This is the very beginning of the process, where you make contact with an IP to start your IVA application. You will discuss your financial situation and they are entrusted to give you as much information as possible to help you make an informed decision about if it is the best option for you.

They will also help you work through your income and expenditure to calculate what you can reasonably afford to pay towards your debts.


This part of the journey is where the paperwork comes in. You’ll be given a proposal document that will detail all the aspects, including the terms and conditions, of your arrangement that you will be required to sign.

Once you have done this, it will be sent to your lenders, proposing the IVA to them and asking them to approve or disapprove of the suggested arrangement. As long as the majority of the lenders who vote are in favour of your IVA, then it will be approved.

In some cases, a lender may reject your proposal. If this happens, your IP is obligated to negotiate the terms to attempt to reverse the decision. Most of the time, they will succeed in doing this, however, this may mean you’ll need to agree to some changes for the IVA to be approved.

There are some cases, however, where it isn’t possible to come to an agreement at this stage, which unfortunately means your IVA is then considered rejected. In these instances, you would need to seek other options for your debts.

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Life with an IVA

Now that you’ve reached this point – where your IVA is approved – it’s time to begin your payments and get yourself through the five-year arrangement. Details of your arrangement will then be posted on the Insolvency Register and noted on your credit file. Interest and charges are frozen on the debts included at this stage and your lenders cannot take any legal action against you.

Many IPs will also request you to complete yearly reviews of your circumstances to make sure that your IVA stays affordable to you. They are then obligated to send you yearly reports to keep you updated on where your arrangement stands.

If you own any properties, you will be asked to attempt to release any available equity from your house towards the end of the arrangement. If you can do this, the funds will be brought into your IVA and used to help pay back your debts – if not, then it may be extended by 12 months.

New beginnings

Once you have completed the payment plan, your IP will then release you from your arrangement. You and the lenders included will be issued completion paperwork that will confirm that the IVA is satisfied and that any remaining balances are now to be written off.

It will be your lender’s job to notify the credit reference agencies in regard to changing your debts to show as satisfied on your credit report. However, the responsibility for notifying the agencies to update the IVA note on your file will fall to you.

It’s at this stage you can make a financial fresh start and begin working to rebuild your credit score. However, it’s usually suggested that you wait around 12 months before trying this to allow everything on your credit report to settle.