The Simple Definition
An Individual Voluntary Arrangement (IVA) is a formal, legally binding debt solution available to residents of England, Wales, and Northern Ireland. It is an agreement between you and your unsecured creditors — banks, credit card companies, loan providers — to repay a portion of what you owe over a fixed period, typically five years (60 months).
At the end of the IVA term, provided you have kept to the agreed payments, any remaining unsecured debt included in the arrangement is legally written off. This means creditors cannot pursue you for the balance.
Key point: An IVA is not a loan or a consolidation product. It is a formal insolvency procedure governed by the Insolvency Act 1986, and it must be set up by a licensed Insolvency Practitioner (IP).
How Does an IVA Work?
An IVA works by replacing multiple monthly debt repayments with a single, affordable monthly payment based on what you can genuinely afford after essential living costs. Your Insolvency Practitioner calculates your disposable income and proposes a monthly payment to your creditors.
The process involves the following stages:
- Free consultation: You speak with a licensed IP who reviews your income, expenses, debts and assets.
- Proposal drafted: The IP creates a formal IVA proposal documenting your financial situation and proposed monthly payment.
- Creditor vote: Creditors (or a specified percentage of them) must vote to accept the proposal. At least 75% by value must agree.
- IVA approved: If accepted, the IVA becomes legally binding on ALL creditors who were listed — even those who voted against it.
- Monthly payments: You make one payment per month for 60 months (typically). The IP distributes these among creditors.
- Completion: After the final payment, the remaining debt is written off and you receive a completion certificate.
The Legal Basis
IVAs were introduced under Part VIII of the Insolvency Act 1986 and are overseen by the Insolvency Service (an agency of the government). Only licensed Insolvency Practitioners — authorised by bodies such as the ICAEW, IPA, or ACCA — can legally act as nominees and supervisors of an IVA.
Once approved, an IVA is legally binding on all named creditors, regardless of how they voted. This is one of its most powerful features: a creditor who voted against cannot continue to pursue you for the debt outside the arrangement.
IVA vs Other Debt Solutions
It is important to understand how an IVA compares to other formal and informal debt solutions available in the UK:
| Feature | IVA | Bankruptcy | DMP | DRO |
|---|---|---|---|---|
| Legally binding on creditors | Yes | Yes | No | Yes |
| Debt written off at end | Yes | Yes | No | Yes |
| Protect home (usually) | Yes | No | Yes | Yes |
| Keep employment (usually) | Yes | May restrict | Yes | Yes |
| Minimum debt requirement | ~£6,000 | None | None | Under £30,000 |
| Typical duration | 60 months | 12 months | Varies | 12 months |
| Appears on credit file | 6 years | 6 years | 6 years | 6 years |
| Public register entry | Yes | Yes | No | Yes |
Who is an IVA For?
An IVA is typically suitable for individuals who:
- Have unsecured debt of at least £6,000 (owed to two or more creditors)
- Have a regular income that allows them to make monthly contributions
- Want to avoid bankruptcy and its associated restrictions
- Are residents of England, Wales, or Northern Ireland
- Have debts they cannot realistically repay in full within a reasonable timeframe
Important: An IVA is not suitable for everyone. If your debt is very low (under £6,000) or you have very little disposable income, a Debt Relief Order (DRO) or Debt Management Plan (DMP) may be more appropriate. Always seek advice from a free, regulated debt charity before making any decision.
What Debts Can Be Included?
An IVA can include most unsecured debts, such as:
- Credit card balances
- Personal loans
- Store card debts
- Bank overdrafts
- Payday loans
- Catalogue debts
- HMRC debts (income tax, VAT, National Insurance)
- Utility bill arrears
- Council tax arrears
Debts that cannot be included in an IVA include:
- Mortgage or secured loan arrears
- Student loans
- Child maintenance or Child Support Agency arrears
- Court fines and criminal penalties
- TV licence fines
- Debts incurred by fraud
Effect on Your Credit File
An IVA will be recorded on your credit file from the date it starts and will remain there for six years. During this period, obtaining mainstream credit — including mortgages, personal loans, and credit cards — will be significantly more difficult, and any credit offered will typically be at higher interest rates.
Your IVA will also be entered on the Individual Insolvency Register, which is publicly searchable. This register is maintained by the Insolvency Service and records details of all IVAs, bankruptcies, and Debt Relief Orders in England and Wales.
How Much Does an IVA Cost?
You do not pay IVA fees upfront. Your Insolvency Practitioner's fees — which include a nominee's fee (for setting up the IVA) and an ongoing supervisor's fee — are paid from your monthly contributions before creditors receive their share. These fees are disclosed transparently in your IVA proposal and are regulated.
If any firm asks you to pay fees upfront before your IVA is approved, this is a serious red flag and you should seek advice elsewhere.
Summary
An Individual Voluntary Arrangement is one of the UK's most popular formal debt solutions for good reason — it offers legal protection, stops creditor contact, allows you to repay what you can afford, and writes off the rest at the end. However, it has significant implications for your credit file and must be set up by a licensed professional.
If you think an IVA might be right for you, the next step is to speak to a licensed Insolvency Practitioner or a free debt advice service. Information on this site is for educational purposes only and does not constitute financial advice.
Free debt advice: MoneyHelper (0800 138 7777), StepChange Debt Charity (0800 138 1111), and Citizens Advice all offer free, regulated debt advice with no obligation.