Individual Voluntary Arrangement (IVA): How It Works
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay a portion of your debts over a fixed period, usually 5 or 6 years. It is an alternative to bankruptcy that lets you keep your home and assets, while writing off the remaining debt at the end. But IVAs are not right for everyone and have significant consequences. This guide explains everything you need to know.
Get instant help right now
A Citizens Advice appointment can take weeks. Our free assistant is available 24/7 with no appointment, giving you clear, step-by-step answers about your exact situation, what to do next, and the deadlines that matter.
Need to take action? It can draft a ready-to-send formal letter for you (optional, from £4.99).
England, Scotland, Wales & Northern Ireland.
What is an IVA?
An Individual Voluntary Arrangement is a formal insolvency procedure governed by the Insolvency Act 1986. Key features:
- ✓A legally binding agreement between you and your unsecured creditors
- ✓An Insolvency Practitioner (IP), a licensed professional, sets up and administers the IVA
- ✓You make affordable monthly payments for a fixed period (usually 5 years, 6 if you have equity in a home)
- ✓At the end, any remaining unsecured debt included in the IVA is written off
- ✓Creditors holding 75% or more of your total debt must vote in favour for the IVA to be approved
- ✓Once approved, creditors cannot take action against you for debts included in the IVA
- ✓IVAs are available in England, Wales, and Northern Ireland. Scotland has a similar arrangement called a Protected Trust Deed
How an IVA works, the process
How much does an IVA cost?
IVA fees are significant, and come out of your monthly payments to creditors:
- ✓Nominee's fee: typically £1,500 to £2,000 for setting up the IVA (charged before creditors receive anything)
- ✓Supervisor's fee: typically 15 to 20% of all realisations (money you pay in) throughout the IVA
- ✓Disbursements: additional costs such as bonding, postage, creditor enquiries
- ✓The fee structure means creditors receive less than you pay in, which is why they must vote to approve
- ✓Free debt advice charities (StepChange, National Debtline) do not charge for advice but will refer you to a licensed IP
- ✓Never pay an upfront fee before an IVA is approved, this is a red flag for IVA mis-selling
IVA pros and cons
- Remaining debt written off at end
- Keep your home (usually)
- Creditors cannot pursue you
- Single monthly payment
- Legally binding, creditors must accept
- Can reduce total amount paid
- Appears on Insolvency Register for 3 months after completion
- Serious damage to credit rating for 6 years
- High fees reduce creditor returns and your own
- Equity in property may be required in final year
- Income changes can affect payments
- Failure can lead to bankruptcy
- Only covers unsecured debts
Is an IVA right for you?
An IVA may be suitable if:
- ✓You have more than £10,000 of unsecured debt across at least 2 creditors
- ✓You have a regular income but cannot repay all your debts in a reasonable timeframe
- ✓You own a property with equity that you want to protect
- ✓You are in a profession where bankruptcy would affect your ability to work (e.g. financial services, legal work)
- ✓Your debts are primarily unsecured (credit cards, personal loans, overdrafts, not mortgages)
An IVA may not be right if:
- ✓Your debts are small enough to be managed through a Debt Management Plan (DMP)
- ✓You have no regular income to make payments
- ✓Bankruptcy would be quicker and leave you debt-free sooner (typically 12 months)
- ✓You have significant assets you would rather protect through a different route
- ✓Your debt is mainly priority debt (mortgage, council tax, HMRC), IVAs only cover unsecured debt
What happens if an IVA fails?
An IVA can fail if you cannot keep up with payments. What happens next:
- ✓Your IP will try to vary the IVA, reduce payments or extend the term, if your circumstances change
- ✓Creditors must agree to variations by 75% majority
- ✓If the IVA cannot be saved, the IP terminates it and issues a Certificate of Failure
- ✓After failure, creditors can resume normal debt collection and enforcement action
- ✓Your IP may petition for your bankruptcy, this is the most common outcome of a failed IVA
- ✓A failed IVA still appears on your credit file and the Insolvency Register for 6 years from the start date
Scotland, Protected Trust Deed
Scotland has a similar arrangement called a Protected Trust Deed (PTD):
- ✓Available to Scottish residents only, IVAs are not available in Scotland
- ✓Requires at least £5,000 of unsecured debt
- ✓Term is usually 4 years
- ✓Administered by a licensed Trustee (equivalent to Insolvency Practitioner in England)
- ✓Must be signed by creditors holding more than half the debt to become 'protected', preventing creditors taking action
- ✓Remaining debt written off at end of term
- ✓Scotland also has the Debt Arrangement Scheme (DAS) as an alternative to Protected Trust Deed
Get instant help right now
A Citizens Advice appointment can take weeks. Our free assistant is available 24/7 with no appointment, giving you clear, step-by-step answers about your exact situation, what to do next, and the deadlines that matter.
Need to take action? It can draft a ready-to-send formal letter for you (optional, from £4.99).
England, Scotland, Wales & Northern Ireland.
Frequently asked questions
What is an IVA and how does it work?
An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your unsecured creditors to repay an affordable amount over a fixed period, usually 5 years. At the end, the remaining debt is written off. An Insolvency Practitioner sets up and administers the IVA. Creditors holding 75% or more of your total debt must vote in favour for it to be approved. Once approved, all included creditors are bound, even those who voted against.
Will an IVA write off all my debt?
An IVA writes off the remaining balance of all unsecured debts included in the arrangement at the end of the term. Debts not included (secured debts like your mortgage, student loans, court fines, child maintenance) are not affected. Typically, claimants pay between 10p to 50p in the pound on the original debt, with the rest written off.
Can I keep my house with an IVA?
Usually yes, you can normally keep your home with an IVA. However, if you have significant equity in your home, your IP may require you to attempt to remortgage in the final year of the IVA to release equity for creditors. If you cannot remortgage, your IVA term may be extended by 12 months instead. IVAs are often chosen over bankruptcy specifically because they allow you to keep your home.
How long does an IVA last?
An IVA typically lasts 5 years (60 monthly payments). If you own a home with equity, it usually lasts 6 years, because the IP may require you to attempt to release equity in year 5. The IVA will remain on your credit file for 6 years from the start date.
What happens if I can't keep up with IVA payments?
Contact your Insolvency Practitioner immediately if your financial circumstances change. They can apply to vary the IVA, reducing payments or extending the term, with creditor approval. If the IVA cannot be saved, it will fail, creditors can resume enforcement, and you may face bankruptcy. Always communicate with your IP rather than missing payments without explanation.
Related guides
Found this useful? Link to it
If you run a site, write an article, or help others with their rights, please link to this guide, it helps more people find free, reliable guidance.