What Is IVA (Individual Volutary Arrangement)

What is an individual voluntary arrangement?

An Individual Voluntary Arrangement (IVA) is a formal and legally-binding agreement between you and your creditors to pay back your debts over a period of time.
An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider.
This page tells you the basics about IVAs.

What is an IVA?

An IVA is an agreement that is made with your creditors to pay off your debts over a set period of time and is one option you can use to pay off your debts. It is a formal, legal debt solution. This means it is approved by the court and your creditors have to stick to it.
An IVA is a form of insolvency but it is different to bankruptcy.
An IVA must be set up by a qualified person, called an insolvency practitioner. This will be a lawyer or accountant. The insolvency practitioner will charge a fee for the IVA. Average fees are around £5000.
The insolvency practitioner deals with your creditors throughout the life of the IVA.
If you go to a debt management company for an IVA, find out about how much they will charge before you decide. A debt management company is likey to be more expensive because they charge a fee on top of the insolvency practitioner's fees.

How do the repayments work?

If you decide to get an IVA, you will work out a repayment plan with the insolvency practitioner. The repayment plan is put to the creditors and if they agree you will pay back a set amount each month, usually for five years. Your monthly repayment will be paid directly to the insolvency practitioner who will then distribute the money to your creditors. Some of your monthly payment may be kept by the insolvency practitioner to pay for their fees.

Can any of the debt be written off?

If the payments into the IVA are not enough to pay your debts in full, the rest will be written off. The insolvency practitioner should advise you about this.

Who can get an IVA?

Not everyone can get an IVA. You have to meet certain criteria.

Is an IVA right for you?

An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider. For example:
  • your savings and personal pension payments will usually be used to pay your creditors
  • if you own a home, you may have to re-mortgage it
  • it may affect your job, for example if you're an accountant or a solicitor
  • if your circumstances change, you could struggle to keep up your IVA payments. If your creditors won't accept less, the IVA will fail and you could be made bankrupt.

What happens at the end of an IVA?

An IVA will last for a set time, usually five years.
When the set number of years have passed, the debts included in the IVA will be discharged. This means you no longer owe those creditors any money. Any leftover debt that has not been repaid is written off.
The record of your IVA will also be taken off the Insolvency Register.

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