What is an Individual Voluntary Arrangement?

An individual voluntary arrangement (IVA) is a legal procedure for people in financial difficulties with unsecured debts. It is a legal agreement between you and your creditors to only pay what you can actually afford to pay off your debts.

The arrangement will stop any further interest and charges being added to your debts, and normally lasts 60 months (although occasionally 72). You will be legally required to pay the agreed monthly payment, and at the end of five years anything remaining (up to 80%!) will be legally written off.

Pros of an IVA

  • You can write off up to 80% of your debt.
  • It is legally binding.
  • It has a strict time frame of five (or six) years.
  • You can keep your assets.
  • Protect your home.
  • One affordable, monthly payment.
  • Stops creditors chasing payment.

Cons of an IVA

  • Will affect your credit rating for six years.
  • It could affect your job.
  • You may need to release equity in your home.
  • Your name will appear on the public Insolvency Service website.
  • It may lead to bankruptcy if you break the terms of the IVA.

Individual Voluntary Arrangement FAQs

In order for your IVA to go ahead there will be a ‘meeting of creditors‘ where your creditors will decide whether or not to accept your IVA. Creditors covering at least 75% of your debt that take part in the vote, must agree for your IVA to go ahead. As long as you get this 75%, the other must go along with it.

The majority of people’s troublesome debts are unsecured debts, and these are what can be included on an IVA. These include;

  • Catalogues
  • Personal loans
  • Overdrafts
  • Payday loans
  • Store cards
  • Income tax and arrears
  • Water arrears

Secured debts, and a few other specific cases, cannot be included in an IVA, and must be paid as agreed. These include;

  • Mortgage
  • HP agreements
  • Court fines
  • TV licence arrears
  • Student loans
  • Child support arrears

This depends on whether you own or rent your home.

If you rent, this should be the end of it. The IVA should no effect on your home, and it’s is extremely unlikely that you will be asked to move.

If you own your home, you may be asked to remortgage it in the final six months of an IVA in order to repay more of your debts. If you are unable to do this, a further 12 months could be added to your IVA.

As long as you own a ‘moderately priced’ car (or motorbike), you will usually be able to keep the car. However, if there is a lot of value in the vehicle, you may be asked to sell it.

Example of an IVA

Example individual voluntary arrangement

Alternatives to an IVA

Debt Management Plan (DMP)

Usually suitable for people with unsecured debts totalling under £15,000, a debt management plan (DMP) is an informal way to repay your creditors by making a single, affordable payment every month. As DMPs are flexible, the amount you pay can change depending on your financial circumstances.


If your debt has reached an unmanageable level, bankruptcy is one way of managing it, especially if you are in no position to pay off your debts in a reasonable time frame.

Protected Trust Deed (PTD)

Only for resident of Scotland, a protected trust deed (PTD) is similar to an IVA in that it is a legally-binding agreement between you and your creditors, whereby you make one, affordable monthly payment.

Free Debt Help

The Money Advice Service is an impartial service set up by the government to help people manage their money. To find out more about free debt advice, debt counselling, debt adjustment and credit information services, visit www.moneyadviceservice.org.uk

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