Individual Voluntary Arrangement (IVA) — What You Need to Know
An Individual Voluntary Arrangement (IVA) is a formal legal agreement between you and your creditors to pay back a proportion of your debts over a fixed period, usually 5–6 years. It can be a way to avoid bankruptcy while managing unaffordable debts.
How an IVA Works
- 1You work with an Insolvency Practitioner (IP) to propose a payment plan
- 2Your creditors vote — if 75%+ (by debt value) agree, the IVA is binding on all
- 3You make monthly payments for 5–6 years
- 4At the end, any remaining debt is written off
Typical IVA Payments
Your monthly payment is based on your disposable income after essential living costs. Typical payments range from £100–£400/month.
Pros and Cons
Advantages
- Creditors cannot contact you directly once approved
- Interest and charges are frozen
- Remaining debt is written off after 5–6 years
- You avoid bankruptcy
- You can usually keep your home
Disadvantages
- Lasts 5–6 years (longer than bankruptcy)
- IP fees come from your payments (typically 15–25%)
- Strict budget — your spending is monitored
- You must declare windfalls (inheritance, bonuses) — the IP may claim them
- Stays on your credit file for 6 years
- If it fails, you may face bankruptcy
IVA vs DMP vs DRO vs Bankruptcy
| Option | Duration | Debts written off? | Cost |
|---|---|---|---|
| IVA | 5–6 years | Remainder after plan | IP fees from payments |
| DMP | Until paid | No | Free via StepChange |
| DRO | 12 months | Yes (under £30k) | £90 |
| Bankruptcy | 12 months | Yes | £680 |
Warning: Fee-Charging IVA Companies
Be cautious of companies that aggressively advertise IVAs. Many charge high fees and may not be the best solution for your situation. Always get free advice first from StepChange or Citizens Advice before agreeing to an IVA.
Frequently Asked Questions
Can I get a mortgage during an IVA?
Getting a mortgage during an IVA is very difficult but not impossible. Most mainstream lenders will decline, but some specialist lenders may consider it. It's generally advisable to wait until the IVA has completed.
What if I can't keep up IVA payments?
Contact your IP immediately. They may arrange a payment break (usually up to 3 months) or vary the agreement. If you can't resume payments, the IVA may fail, which could lead to bankruptcy.
Do all debts have to be included in an IVA?
Most unsecured debts are included. However, student loans, court fines, child maintenance, and secured debts (like a mortgage) are not included.
Related Guides
Debt Relief Order (DRO) — Full Guide
What is a DRO, who qualifies, and how to apply. Free guide covering eligibility, costs, restrictions, and what happens after 12 months.
What Happens If Your Credit Card Defaults
Learn what happens when a credit card defaults, how it affects your credit score, and what options you have. Plain-English guide with practical next steps.
Sources & Further Reading
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