Individual Voluntary Arrangement (IVA): How It Works and Who It Suits

How an IVA works, step by step

An IVA is a formal agreement made under the Insolvency Act 1986. Once approved, it binds every creditor included in it — even those who voted against it.

1. Free advice first

   Before you approach an IVA firm, it's worth speaking to a free debt adviser (see our free help page). They'll tell you whether an IVA is likely to be the best option or whether a DMP, DRO or bankruptcy would suit you better. Some free services can refer you to an IP if an IVA is right.

2. The insolvency practitioner assesses your finances

   An IP (or their staff) goes through your income, essential spending, debts and assets. Your budget is based on the Standard Financial Statement spending guidelines, which creditors recognise.

3. A proposal is drafted

   The proposal sets out what you'll pay each month, for how long, what happens to any property equity, the IP's fees, and an estimate of what creditors will get back. Read it carefully before you sign — it's a legal document.

4. Creditors vote

   The IP sends the proposal to your creditors, who vote by a set date (usually electronically — you don't attend a meeting). It is approved if creditors owed at least 75% of the debt, counting only those who vote, agree. Creditors can ask for changes ("modifications"), such as a longer term.

5. The IVA runs

   You make one monthly payment to the IP (now called your "supervisor"), who takes their fees and pays your creditors. Interest and charges on included debts stop, and those creditors can't take further action against you.

6. Annual reviews

   Each year you send updated details of your income and spending. Payments can go up if your income rises, or be varied if it falls.

7. Completion

   When you've made all the agreed payments and met the terms, the supervisor issues a completion certificate and the rest of the included debt is written off.

IVA eligibility: who can get one?

There is no official minimum debt or income for an IVA. You need to be unable to pay your debts as they fall due, have enough regular spare income to make a meaningful monthly payment, and have creditors who are likely to accept your proposal. In practice, most insolvency practitioners look for unsecured debts of around £7,000–£10,000 or more owed to at least two creditors, because the fees make smaller IVAs uneconomic.

• You live in England, Wales or Northern Ireland (Scotland has Protected Trust Deeds instead)
• You have a regular income — employed, self-employed or, sometimes, benefits or pension income
• After essential costs, you have a stable monthly surplus
• You can realistically keep up payments for 5–6 years
• Your debts are mainly unsecured

An IVA is less likely to suit you if your income is very low or unpredictable, if you could repay everything in a few years through a debt management plan, or if you qualify for a Debt Relief Order.

How much debt is written off in an IVA?

There is no standard or average amount you can rely on. The amount written off is whatever is left of your included debts after you've completed every payment the IVA requires. It depends on how much you owe, what you can afford each month, how long the IVA lasts, any equity or lump sums paid in, and the fees deducted. Your proposal must estimate what creditors will receive, often shown as a "dividend" in pence per £1 owed — that is the most reliable guide to your own case.

What is the typical recovery for a creditor in an IVA?

From a creditor's point of view, the return is the dividend set out in the proposal and updated by the supervisor during the IVA. It varies widely from case to case. A creditor generally gets more from an IVA than it would if the person went bankrupt with no assets — which is why creditors often accept them — but there's no fixed percentage.

IVA fees: how much goes to the insolvency practitioner?

IVA fees are not charged on top of your payments — they are taken out of them, which reduces what your creditors receive. There is usually a "nominee" fee for preparing the proposal and a "supervisor" fee for running the IVA, often taken as a share of each payment, plus some costs (disbursements). Fees vary between firms and together often add up to several thousand pounds over the life of an IVA.

Before you agree, ask the IP for the total estimated fees, how they're taken, and what the estimated return to creditors is. Insolvency practitioners must be licensed by a recognised professional body. If you're unhappy with how an IP has acted, you can complain to the firm and then through the Insolvency Service's complaints gateway.

Which debts can be included in an IVA?

Homeowners and equity in an IVA

You usually keep your home in an IVA. If you have equity, you may be asked to try to release some of it in the final year — typically by remortgaging — and pay it into the IVA. If you can't, the IVA is normally extended by up to 12 months instead. You keep paying your mortgage as normal; it isn't part of the IVA.

The proposal will say how equity is treated, so check this before you agree. If you own a home with a partner, only your share of the equity is relevant. Keeping your home is one of the main reasons homeowners choose an IVA over bankruptcy — see IVA vs bankruptcy.

Can I keep my car in an IVA?

Usually, yes — if you need it and its value is reasonable. If a car is worth significantly more than you need, creditors may expect it to be sold and replaced with a cheaper one, with the difference paid into the IVA. A car on hire purchase or PCP is usually left out of the IVA so you can keep paying it, as long as the payments are reasonable for your needs. Check what your proposal says.

Will an IVA affect my job?

For most people, an IVA doesn't affect their job, and your employer isn't normally told. However, an IVA is on the public Insolvency Register, and some roles have rules about insolvency — for example some jobs in financial services, accountancy, law, the police, the armed forces or those needing security vetting. Check your employment contract and any professional body rules before you apply. Unlike bankruptcy, an IVA doesn't automatically stop you being a company director, though a company's own rules or lenders might.

If you're self-employed, you can usually keep trading in an IVA; your proposal will be based on your business income.

Windfalls, gifts and money from other people

If you receive a windfall during an IVA — such as an inheritance, a lottery win, a compensation payment or a large bonus — you must tell your supervisor, and it will usually have to be paid into the IVA for your creditors. Most IVAs follow standard terms that set out exactly how windfalls and increases in income are treated, so read yours.

Can I accept money from family while in an IVA?

Your IVA terms may require you to tell your supervisor about money you receive. Small, regular help with living costs is often treated differently from a lump sum, so check before you accept anything significant. A family member offering a lump sum to settle the IVA early is possible, but creditors have to agree to it.

Can I borrow during an IVA?

IVA terms usually stop you taking credit over £500 without your supervisor's permission.

Can creditors in my IVA still take money from me?

No. Once the IVA is approved, creditors included in it are bound by it. They can't take court action, add interest or charges, or demand payment from you for those debts. If a creditor contacts you, refer them to your supervisor. Debts not included in the IVA (for example a mortgage) must still be paid.

Life during an IVA: reviews and rules

An IVA comes with ongoing checks. You'll usually need to:

• Send updated income and expenditure details, with payslips or other evidence, at each annual review
• Tell your supervisor promptly about changes, such as a new job, a pay rise, a new partner sharing costs, or a windfall
• Keep up your ongoing bills, including your mortgage or rent and council tax
• Not take on credit over £500 without permission

If your income goes up, your payments may be increased by an amount set out in your IVA terms. If your income falls, your supervisor may be able to vary the IVA or agree a payment break — tell them early.

What if I can't keep up the payments?

Contact your supervisor as soon as you know you'll have a problem. Many IVAs allow a limited number of missed or reduced payments, and the supervisor can ask creditors to agree a variation to lower your payments if your circumstances have changed.

IVA vs other debt options

Compare in more detail: IVA vs DMP and IVA vs bankruptcy. If you need time to think, Breathing Space can pause creditor action for up to 60 days while you get advice.

Frequently asked questions