What is an IVA? A Plain-English Guide to Individual Voluntary Arrangements
Published 18th of September 2016·Updated 30 March 2026
Reviewed by: Reviewed for accuracy April 2026
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your unsecured creditors. You repay a portion of your debts over a fixed term, usually five or six years, based on what you can genuinely afford. At the end of the arrangement, any remaining debt included in the IVA is legally written off.
Short Summary
An IVA is one of the most widely used formal debt solutions in England, Wales and Northern Ireland. In 2023, around 65,000 IVAs were registered, according to the Insolvency Service.
You must have unsecured debt of at least £6,000 and owe money to two or more creditors to qualify. A licensed insolvency practitioner sets up and manages the entire process on your behalf.
Once creditors holding 75 per cent or more of your debt by value approve the IVA, all creditors included in it are legally bound by its terms and cannot take further action against you.
An IVA affects your credit file for six years from the start date and is recorded on the public Insolvency Register. It is a serious decision and professional advice is strongly recommended before proceeding.
Who qualifies for an IVA?
IVAs are available to individuals living in England, Wales or Northern Ireland. You generally need unsecured debt of at least £6,000 and two or more creditors. Most insolvency practitioners also expect you to have a regular income, so they can calculate a realistic monthly payment. Having assets such as a home is not required, but if you are a homeowner, the IVA may require you to release equity from your property towards the end of the arrangement.
Scotland uses a different system called a Protected Trust Deed, which works in a similar way but operates under Scottish insolvency law.
What debts can be included in an IVA?
Not every debt can be included. The table below shows what is and is not covered.
| Can be included | Cannot be included |
|---|---|
| Personal loans | Mortgages and secured loans |
| Credit cards | Student loans |
| Store cards | Child Support Agency arrears |
| Bank overdrafts | Magistrates' court fines |
| VAT and income tax owed to HMRC | Council tax arrears |
| Catalogue debts | Hire purchase agreements on essential items |
If a debt cannot be included, you must continue to pay it separately throughout the IVA.
How does the IVA process work?
You start by speaking to a licensed insolvency practitioner (IP). They will review your income, essential outgoings and total debt to calculate how much you can afford to pay each month. They then draft a formal proposal and send it to your creditors.
Creditors vote on whether to accept the proposal. If creditors representing 75 per cent or more of your debt by value vote in favour, the IVA is approved and becomes legally binding on all parties, including creditors who voted against it. You then make a single monthly payment to your IP, who distributes it to your creditors.
How much does an IVA cost per month?
Monthly payments vary significantly depending on your income and outgoings. According to StepChange Debt Charity, typical IVA payments range from around £80 to £200 per month, though higher payments are possible for those with greater disposable income. Your insolvency practitioner calculates the figure by subtracting your essential living costs from your take-home pay.
The IP charges fees for their work, but these are taken from your monthly payments rather than added on top. You should receive a clear breakdown of fees before you sign anything.
How does an IVA affect your credit score?
An IVA is registered on the public Insolvency Register and recorded on your credit file by all three main credit reference agencies: Experian, Equifax and TransUnion. It stays on your credit file for six years from the date it begins. During this period, applying for most forms of credit will be very difficult. After the six years are up, the record is removed and you can begin rebuilding your credit history.
What happens if your circumstances change during an IVA?
IVAs are reviewed annually by your insolvency practitioner. If your income rises, your payments may increase. If you receive a windfall such as an inheritance or a work bonus above a certain threshold, you may be required to contribute a portion of it to your IVA. If your income falls significantly, your IP can apply to modify the terms. If the IVA fails, for example because you miss several payments, it may be terminated and creditors can resume chasing you for the full amount owed.
IVA vs other debt solutions
| Solution | Typical term | Debt written off? | Effect on home | Credit impact |
|---|---|---|---|---|
| IVA | 5-6 years | Yes (remaining balance) | Possible equity release | 6 years on credit file |
| Debt Management Plan (DMP) | Variable | No | None | Markers while active |
| Bankruptcy | 12 months | Yes (most debts) | At risk of sale | 6 years on credit file |
| Debt Relief Order (DRO) | 12 months | Yes | Must have under £2,000 in assets | 6 years on credit file |
A Debt Management Plan through a free service such as StepChange is non-binding and less damaging to your credit file, but it does not write off debt. Bankruptcy is faster but more severe, particularly if you own a home. A free debt adviser can help you compare these options without any obligation.
FAQ
How long does an IVA last?
Most IVAs run for five years. However, if you own a home and are required to release equity near the end of the term but cannot do so, the IVA is typically extended to six years instead. Your insolvency practitioner will explain which applies to your situation before you sign.
Can creditors reject my IVA?
Yes. Creditors vote on the proposal, and it only passes if those holding 75 per cent or more of your debt by value vote in favour. If the IVA is rejected, your insolvency practitioner may renegotiate the terms and call a second meeting, or advise you on alternative solutions.
Will an IVA stop creditor calls and letters?
Once an IVA is approved, all creditors named in it are legally prevented from contacting you to demand payment or taking further legal action. If a creditor continues to contact you after approval, report this to your insolvency practitioner immediately.
Can I get a mortgage after an IVA?
Getting a mortgage while an IVA is active is extremely difficult. After the IVA ends and is removed from your credit file at the six-year point, your options improve considerably. Some specialist lenders will consider applicants sooner, but expect higher interest rates and larger deposit requirements.
Is an IVA the same as bankruptcy?
No. Bankruptcy is a separate legal process that typically lasts 12 months and can result in the sale of significant assets, including your home in some cases. An IVA is a private arrangement that avoids bankruptcy and usually allows you to keep your home, provided you can meet the equity release requirement if applicable.
Where can I get free IVA advice?
StepChange Debt Charity (0800 138 1111), Citizens Advice, and the Money Helper service (run by the Money and Pensions Service) all offer free, impartial debt advice. Be cautious of fee-charging IVA companies that approach you unsolicited; always check that any insolvency practitioner is licensed by a recognised professional body such as the Insolvency Practitioners Association.