What is an Individual Voluntary Arrangement?

The simple definition

An Individual Voluntary Arrangement (IVA) is a formal insolvency procedure governed by the Insolvency Act 1986 and available in England, Wales and Northern Ireland. Scotland has the Protected Trust Deed — an equivalent procedure. The IVA itself is under the Insolvency Act 1986. It is a legally binding contract — supervised by a licensed Insolvency Practitioner (IP) — between you and the people or companies you owe money to (your creditors).

Once approved, an IVA freezes interest and charges on your included debts, stops creditor contact, and means you make a single affordable monthly payment for the agreed term. At the end of the IVA, any remaining included debt is legally written off.

How does an IVA work?

The process follows a clear sequence managed by your Insolvency Practitioner:

1. Assessment — your IP reviews your income, debts, assets and expenditure to calculate an affordable monthly payment.
2. Proposal — your IP prepares a formal proposal document outlining the repayment terms and sends it to all your creditors.
3. Creditor vote — creditors vote on the proposal. If creditors holding 75% or more of your debt by value vote in favour, the IVA is approved and becomes binding on all creditors, including those who voted against.
4. Monthly payments — you make one affordable payment per month to your IP, who distributes funds to creditors. Interest and charges are frozen from day one.
5. Completion — after 60 months (or the agreed term), your IP issues a completion certificate. All remaining included debt is legally written off.

What debts can be included?

An IVA can include most unsecured debts:

• Credit cards and store cards
• Personal loans and overdrafts
• Payday loans
• Catalogue and buy-now-pay-later debts
• Council tax arrears
• HMRC debts (income tax, VAT, National Insurance)
• Utility bill arrears
• Benefit overpayments

IVA vs other debt solutions

Feature	IVA	Bankruptcy	DMP	DRO
Legally binding	Yes	Yes	No	Yes
Debt written off	Remainder	Most	No	All
Protects home	Usually	Risk	Yes	Yes
Typical term	60 months	12 months	Variable	12 months
Min debt level	~£6,000+	Any	Any	Under £30k
Employment impact	Limited	Some roles	None	None
Credit impact	6 years	6 years	Varies	6 years

Who can apply for an IVA?

To be eligible for an IVA you generally need:

• Unsecured debts of at least £6,000–£10,000 (no strict legal minimum, but most IPs require this)
• Two or more creditors
• A regular income sufficient to make monthly contributions
• UK residency (England, Wales or Northern Ireland)

Homeowners, self-employed individuals and those with HMRC debts can all use an IVA — though the terms may differ. See our eligibility checker for a personalised assessment.

How much does an IVA cost?

You do not pay any upfront fees. Your IP's costs are taken from your monthly payments as part of the IVA itself:

• Nominee fee — covers setting up the IVA (typically £1,000–£2,000)
• Supervisor fee — annual fee for managing the IVA (typically £1,000–£1,500/year)
• Disbursements — court costs and other expenses

How does an IVA affect your credit score?

An IVA is recorded on your credit file by all three credit reference agencies (Experian, Equifax, TransUnion) and on the public Individual Insolvency Register. This remains on your credit file for six years from the start date — meaning even after completion you may find it difficult to obtain mainstream credit for a period.

However, many people find their credit score begins to improve relatively quickly after their IVA completes, as the underlying debts are resolved. See our guide to rebuilding credit after an IVA.

The advantages of an IVA

• Debt written off — typically 25–80% of total debt is written off at completion
• One affordable payment — based on what you can genuinely afford, not what creditors demand
• Legal protection — creditors cannot take further action once the IVA is approved
• Keep your home — unlike bankruptcy, an IVA does not automatically put your home at risk (though homeowners may need to release equity in year 4)
• Interest frozen — all interest and charges on included debts are frozen from day one
• Fixed end date — you know exactly when you will be debt free

The disadvantages of an IVA

• Your credit file is affected for 6 years
• You must stick to a strict budget throughout the term
• Windfalls (inheritance, redundancy pay) may need to be paid into the IVA
• Homeowners may need to remortgage or extend the IVA by 12 months in year 4
• If the IVA fails, you could face bankruptcy
• Not all creditors will agree — you need 75% by value to approve

Frequently asked questions