IVA Advice: How Individual Voluntary Arrangements Work

What an IVA actually is — and what it commits you to

If you are searching for advice on an Individual Voluntary Arrangement (IVA), the most important thing to understand up front is that an IVA is a formal insolvency procedure. It is legally binding on both you and your creditors, it appears on the public Individual Insolvency Register, and once approved it usually runs for 60 months — five years of agreed monthly payments. According to GOV.UK, an IVA is set up and supervised by a licensed Insolvency Practitioner (IP), who is the only person legally allowed to propose one on your behalf.

At the end of the term, any qualifying unsecured debt covered by the arrangement is written off. That is the headline appeal of an IVA — but it comes with strict conditions, fees built into your payments, and consequences that last beyond the arrangement itself. The information below explains how IVAs work in England, Wales and Northern Ireland (Scotland has a different equivalent called a Trust Deed), what creditors can and cannot do once the IVA is in place, and the points commonly raised by people considering one.

How an IVA is set up

The process is set out by the Insolvency Service. A licensed Insolvency Practitioner reviews your income, expenditure, assets and debts, then drafts a proposal for your creditors. That proposal sets out how much you will pay each month, for how long, and what percentage of the debt each creditor can expect to receive.

The proposal is then put to a creditors' decision procedure. Creditors representing at least 75% by value of those who vote must agree for the IVA to be approved. Once that threshold is met, the IVA binds all included creditors — even those who voted against it or did not vote at all.

What happens after approval

Once approved, the IVA is registered on the Individual Insolvency Register, which is a public record. The IP becomes the supervisor of the arrangement and you make a single monthly payment to them. The IP distributes that money to creditors after taking their fees, which are agreed as part of the proposal.

Included creditors cannot pursue you for the debt, add further interest or charges, or take court action while the IVA is running and you are complying with its terms. This protection is one of the main reasons people consider an IVA over informal arrangements.

Who can be considered for an IVA

There is no statutory minimum debt level for an IVA, but in practice most IPs will only propose one where there is enough debt to make the process worthwhile — commonly quoted figures are around £6,000 to £10,000 across two or more creditors. The general eligibility points are:

• You live in England, Wales or Northern Ireland (Scotland uses Protected Trust Deeds).
• You have a regular income from which you can make a sustainable monthly contribution.
• You have unsecured debts that you cannot realistically repay in full within a reasonable timeframe.
• Your circumstances are stable enough to commit to the agreed payments for the full term.

Some debts cannot be included in an IVA. According to GOV.UK these include court fines, student loans, child maintenance arrears, and secured debts such as mortgages. Council tax arrears and HMRC debts can usually be included, but the rules differ for each creditor.

What an IVA costs

An IVA is not a free debt solution. IP fees — both for setting up the proposal (the nominee fee) and for running the arrangement (the supervisor fee) — are taken from your monthly contributions. They are disclosed in the proposal that creditors vote on.

You do not pay these fees separately on top of your monthly payment. Instead, the fees come out of the pot that would otherwise have gone to creditors. This is why creditors look closely at the proposal before voting — they are effectively agreeing to a recovery rate after fees are deducted.

What happens to your assets and home

An IVA is not bankruptcy — you do not automatically lose your home or other assets. However, if you own a property with equity, the standard IVA proposal usually includes a clause requiring you to try to release some of that equity in the final year (typically month 54). If you cannot remortgage on reasonable terms, the usual fallback is to extend the IVA by 12 months, taking the total length to 72 months.

Vehicles needed for work or family life are usually allowed, subject to a reasonable value. Luxury or high-value assets may need to be sold or accounted for in the proposal. Each case is assessed individually by the IP.

The impact on your credit file and public record

An IVA appears on your credit file for six years from the date it starts. It is also listed on the Individual Insolvency Register for the duration of the arrangement, which is publicly searchable. This will affect your ability to obtain credit during and immediately after the IVA.

There are also restrictions during the IVA itself. You typically cannot borrow more than £500 without the supervisor's permission, and certain professions — including some financial services, legal and accountancy roles — may have rules about insolvency that affect employment. It is worth checking your employment contract or professional body's rules before proceeding.

What can go wrong with an IVA

The risks of an IVA are real and worth understanding. If you miss payments and cannot agree a variation with creditors, the IP can terminate the arrangement. A failed IVA means the original debts come back into force, with any interest and charges that were frozen often re-applied, and creditors can resume recovery action — including petitioning for your bankruptcy.

Common causes of IVA failure include:

• Income dropping unexpectedly (job loss, reduced hours, illness).
• Unexpected expenses that were not built into the budget.
• Missing the annual review or failing to declare a windfall, bonus or overtime as required.
• Not engaging with the supervisor when difficulties arise.

IPs can sometimes agree variations — for example, a payment break or a reduction in monthly contributions — but these need creditor approval and are not guaranteed.

How an IVA compares to other formal options

An IVA is one of several formal debt solutions. The others include a Debt Relief Order (DRO), bankruptcy, and informal arrangements like a Debt Management Plan (DMP). Each has different eligibility rules, costs, durations and consequences.

A DRO, for example, costs nothing to apply for since the £90 fee was scrapped in April 2024, and the qualifying debt ceiling rose to £50,000 in June 2024 — but it is only available to people with low income, minimal assets and a vehicle worth no more than £4,000. Bankruptcy is a court-based process with an application fee currently set by GOV.UK. A DMP is informal, not legally binding, and creditors can withdraw at any time.

Which formal option is suitable depends on the specifics of someone's debts, income, assets, household and goals. That is a decision that should be made with regulated debt advice, not a general article.

Common questions about IVAs

Can I get an IVA if I am self-employed?

Yes — IVAs are commonly used by self-employed people because they preserve trading where bankruptcy might disrupt it. The proposal will reflect variable income and may include provisions for trading expenses.

Will my partner be affected?

An IVA is a personal arrangement, so it does not directly cover a partner's debts or income. However, household income and expenditure will be reviewed by the IP to assess what you can afford to contribute.

What happens if I receive a windfall during the IVA?

Most IVA proposals include a clause requiring windfalls — inheritance, lottery wins, PPI refunds — to be paid into the arrangement. The exact rules are set out in the proposal each person signs.

Can creditors refuse the IVA?

Yes. If creditors representing more than 25% by value of those who vote reject the proposal, the IVA fails at the approval stage. The IP may be able to redraft and resubmit, but there is no guarantee.