What Is an IVA and How Does It Work?
Last Updated: July 2026
Your complete guide to Individual Voluntary Arrangements in the UK. Discover how an IVA can help you write off unaffordable debt and get a fresh financial start amidst rising UK consumer debt levels.
Reviewed by FCA-regulated debt advisors | Partnered with UK Insolvency Service regulated advisors
Check Your EligibilityWhat is an IVA?
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. It's a type of insolvency, approved by the court and regulated by the UK Insolvency Service, and is designed for people with regular income who can't afford to repay their unsecured debts.
With an IVA, you make affordable monthly payments, typically for 5-6 years. Any remaining unsecured debt is then written off. Throughout the IVA, your creditors are legally forbidden from taking further action against you.
Legally Binding
Once approved, creditors included in the IVA cannot chase you for payment.
Fixed Term
Typically lasts for 60 months (5 years), after which remaining debt is written off.
Debt Write-Off
A significant portion of your unsecured debt (often up to 80%) can be written off.
How Does an IVA Work? The 5-Step Process
- Initial Consultation: You speak with a qualified debt advisor. They will assess your financial situation (income, expenses, debts) to see if an IVA is your best option. We recommend managing your household budget beforehand to understand your affordability.
- Proposal Creation: If an IVA is suitable, an Insolvency Practitioner (IP) will work with you to draft a proposal to your creditors. This details your proposed monthly payment.
- Creditors' Meeting: The proposal is sent to your creditors, who vote on whether to accept it. For the IVA to be approved, creditors representing 75% by value of the voting creditors must agree.
- IVA is Active: Once approved, the IVA is legally binding. You make your single monthly payment to your IP, who distributes it to your creditors. All interest and charges are frozen, and they must stop debt collector activity.
- Completion: After the agreed term (usually 5 years), and having met all obligations, your IVA is complete. Any remaining unsecured debt is written off, and you are debt-free.
Pros and Cons of an IVA
It is crucial to understand the pros and cons of an IVA before proceeding.
Advantages
- Write off a large portion of your debt.
- Creditors are legally stopped from contacting you.
- Interest and charges on your debts are frozen.
- You make one single, affordable monthly payment.
- It allows you to protect key assets like your home.
Disadvantages
- Your credit rating will be negatively affected for 6 years.
- Your name will be on the public Insolvency Register.
- If you are a homeowner, you may need to release equity from your property.
- There are restrictions on your spending during the IVA.
- If you fail to keep up payments, your IVA could fail and creditors could make you bankrupt.
Am I Eligible for an IVA?
While every case is different, you generally need to meet the following IVA eligibility criteria to qualify for an IVA under UK insolvency law:
- Have at least £6,000 of unsecured debt.
- Owe money to two or more creditors.
- Have a regular, reliable income (from employment, benefits, etc.).
- Be able to afford a monthly payment of at least £80 after essential living costs.
- Live in England, Wales, or Northern Ireland.
The best way to know for sure is to complete our free and confidential eligibility check. Our advisors work with FCA-regulated partners to ensure you receive appropriate advice. You can verify the regulatory status of debt advice firms via the FCA Register.
Impact on Your Life
Credit Rating
An IVA will be recorded on your credit file for 6 years from the start date. During this time, it will be difficult to obtain credit. After it's removed, you can focus on rebuilding your credit after an IVA.
Your Home & Assets
An IVA is designed to help you avoid bankruptcy and protect your assets. If you're a homeowner with equity, you may be required to remortgage in the final year to release some funds for your creditors. Your car is usually safe if it's of a reasonable value.
Employment
Most jobs are unaffected by an IVA. However, some professions (like accountancy, law, or financial services) may have restrictions. It's important to check your employment contract.
The Legal Framework Behind IVAs
Part VIII of the Insolvency Act 1986 provides the legal basis for Individual Voluntary Arrangements. While the IVA Protocol is a voluntary standard framework widely followed by practitioners and creditors to ensure fairness, it is not legally required for all IVAs.
It is important to remember that Licensed Insolvency Practitioners must hold authorisation from one of the recognised professional bodies, such as the IPA, ICAEW, ACCA, or ICAS. When proposing an IVA, the 75% creditor approval threshold is calculated by the value of voting creditors, not the number of creditors. Once approved, the IVA is legally binding on all unsecured creditors included in the proposal, even those who voted against it. You can always seek free professional debt advice before entering this legal framework.
IVA Statistics
In 2025, approximately 71,957 IVAs were registered in England and Wales, representing 57% of all individual insolvencies and a 7% increase from 2024, according to the Insolvency Service Annual Statistics.
By June 2026, 7,318 IVAs were registered in a single month (16% higher than June 2025). The 12-month rolling rate stands at 27.1 per 10,000 adults. These figures reflect the broader trends seen in the latest UK household debt statistics. While approximately 65-70% of IVAs complete successfully, the Insolvency Service reports a lifetime termination rate of approximately 34% for the 2016-2018 cohort.
The Windfall Clause
A standard feature of any IVA is the windfall clause, which requires you to declare all unexpected income or financial gains during the term. This includes inheritances, lottery wins, and compensation payouts.
Typically, an inheritance must be paid entirely into the IVA to increase the dividend to your creditors. For work bonuses, the calculation is structured: you are allowed to keep 10% of your normal take-home pay from the bonus, but 50% of the remainder must be paid into the IVA. This clause remains active for the full duration of your IVA term.
IVA Fees and Costs
There are fees associated with an IVA, but they are not paid separately or upfront. Instead, IVA fees are paid from your agreed monthly contributions. This means the amount you pay each month is based solely on what you can afford, and the Insolvency Practitioner takes their fees from that pot before distributing the rest to creditors.
Typically, total fees over the IVA term range from £4,000 to £8,000. This is usually split into a Nominee fee (around £1,000-£3,000) for setting up the arrangement, and a Supervisor fee (usually 15-20% of your ongoing contributions) for managing it. Because Licensed Insolvency Practitioners must be remunerated for their professional services, "fee-free" IVA providers do not exist. However, these fees are heavily regulated and clearly outlined in your proposal.
Homeowners and IVAs
If you own a home, an equity review is typically conducted in year 5 of your IVA. If your share of the equity exceeds approximately £10,000, you may be required to attempt to remortgage to release funds for your creditors.
If remortgaging is not possible—often the case due to the IVA being on your credit file—your IVA term is usually extended by 12 months instead. Throughout the process, your regular mortgage payments are protected as essential expenditure. You can learn more in our guide to getting a mortgage after an IVA.
After Your IVA Completes
Once your IVA successfully completes, any remaining eligible unsecured debt is legally written off, and you are issued a completion certificate. However, the IVA will remain on your credit file for 6 years from the approval date (not the completion date).
Taking proactive steps to rebuild your credit is essential. You can consult our post-IVA credit guide, utilize the credit rebuilders hub, try the credit score simulator, or follow a structured six-month rebuild plan to get back on track.
IVA Alternatives
An IVA is just one of several debt solutions. Depending on your circumstances, you might consider:
- Debt Management Plan (DMP): An informal, flexible arrangement with no debt write-off, where you repay the debt in full at a reduced monthly rate.
- Debt Relief Order (DRO): Designed for those with debts under £50,000, minimal assets, and very low disposable income. There is no application fee, and debts are written off after 12 months.
- Bankruptcy: A formal insolvency process that offers a faster discharge (usually 12 months) but comes with severe risks to assets like your home and a £680 application fee.
You can read more about IVA alternatives or learn how to get temporary protection through Breathing Space. If you need support, consider the mental health money hub.
Frequently Asked Questions About IVAs
What is an IVA and how does it work?
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay your debts over a fixed period, typically 5-6 years. It's approved by the court and regulated by the UK Insolvency Service. You make one affordable monthly payment to a licensed Insolvency Practitioner (IP), who distributes it to your creditors. Once 75% by value of voting creditors agree to the proposal, all creditors are bound by it. Interest and charges are frozen, and creditors cannot take further action against you. After completing the agreed term, any remaining unsecured debt included in the IVA is written off, giving you a fresh financial start.
How much debt do I need for an IVA?
Generally, you need at least £6,000 of unsecured debt to qualify for an IVA in England, Wales, or Northern Ireland. You also need to owe money to two or more creditors and have a regular income that allows you to make monthly payments of at least £80-£100 after your essential living expenses. The debt must be unsecured, meaning debts like credit cards, personal loans, overdrafts, store cards, and payday loans. Secured debts like mortgages or car finance cannot be included in an IVA. If you have less debt or different circumstances, other debt solutions like a Debt Management Programme or a Debt Relief Order might be more suitable.
Can I keep my house with an IVA?
Yes, one of the key advantages of an IVA is that it's designed to help you keep your home, unlike bankruptcy where your property may be sold. However, if you're a homeowner with equity in your property, you may be required to remortgage in the final year of your IVA (typically year 5) to release some of this equity to pay your creditors. If remortgaging isn't possible due to poor credit or other reasons, your IVA term may be extended by 12 months instead. Your monthly mortgage or rent payments are considered essential expenses and are protected.
What's the difference between an IVA and bankruptcy?
While both IVAs and bankruptcy are forms of insolvency regulated by The Insolvency Service, there are significant differences. An IVA is a voluntary agreement where you propose a repayment plan to creditors and continue making affordable payments for 5-6 years. It's designed to protect assets like your home. Bankruptcy, on the other hand, usually results in most of your valuable assets being sold to pay creditors, and you're typically discharged after 12 months, though the credit record stays for 6 years. Both appear on the public Insolvency Register and affect your credit rating for 6 years.
How much will my IVA payments be?
Your IVA payment amount is calculated based on your individual financial circumstances - specifically, your income minus your essential living expenses (known as your 'disposable income'). Typically, payments range from £80 to £200+ per month, but this varies greatly depending on your situation. Your Insolvency Practitioner will complete a detailed income and expenditure assessment with you to determine what's affordable and reasonable.
What happens if my IVA fails?
If you persistently fail to make payments, your Insolvency Practitioner may terminate your IVA. Once terminated, you lose the legal protection it provided — creditors can resume interest, charges, and collection action, and the full original debt becomes payable again. According to the Insolvency Service, approximately one in three IVAs do not reach completion, based on the Insolvency Service's analysis of the 2016-2018 cohort (lifetime termination rate of approximately 34%).
Will an IVA affect my job or career?
For most people, an IVA will not affect their employment. However, certain professions have restrictions — including solicitors, accountants, financial advisors, police officers, and some military and civil service roles. These professions may have codes of conduct that require disclosure of insolvency arrangements. Check with your professional body or employer if unsure.
How is an IVA different from a Debt Management Plan (DMP)?
The key difference is that an IVA is a legally binding agreement overseen by the court and managed by a Licensed Insolvency Practitioner, while a DMP is an informal, voluntary arrangement. An IVA freezes interest and charges, prevents creditor legal action, and writes off remaining debt at the end. A DMP does not guarantee that creditors will freeze interest or accept reduced payments, and you remain liable for the full amount.
What is the windfall clause in an IVA?
The windfall clause is a standard condition in an IVA that requires you to declare any unexpected financial gains, such as an inheritance, lottery win, or compensation payout. Inheritance and lottery wins typically must be paid entirely into the IVA to increase the return to your creditors. For work bonuses, you generally keep 10% of your normal take-home pay, and 50% of the remainder goes into the IVA.
How much do IVA fees cost?
IVA fees are typically between £4,000 and £8,000 in total over the 5-6 year term. This usually consists of a Nominee fee (around £1,000-£3,000) for setting up the IVA, and a Supervisor fee (15-20% of your contributions) for managing it. Importantly, you do not pay these fees upfront or out-of-pocket; they are deducted directly from the single affordable monthly payment you make to your Insolvency Practitioner.
Can I get a mortgage during or after an IVA?
It is extremely difficult to get a mortgage during an IVA because you cannot borrow more than £500 without permission from your IP, and high-street lenders will usually decline your application. After your IVA completes, getting a mortgage is possible but you will likely need to use a specialist adverse-credit lender and pay higher interest rates. Read our guide to securing a mortgage after an IVA for details.
What debts can be included in an IVA?
You can include most unsecured debts in an IVA, such as credit cards, personal loans, overdrafts, store cards, payday loans, catalogue debts, and outstanding HMRC tax bills. You cannot include secured debts (like mortgages or car finance), student loans, court fines, or child maintenance arrears.
Ready to See if an IVA is Right for You?
Our free 2-minute checker will give you an instant indication of your eligibility. It's confidential and won't affect your credit score.
Check My Eligibility NowEditorial Statement: This content has been prepared in accordance with FCA guidelines and reviewed against guidance published by The Insolvency Service and MoneyHelper. YourFinances.co.uk connects consumers exclusively with Licensed Insolvency Practitioners regulated by the IPA, ICAEW, and ACCA. We do not provide regulated financial advice ourselves. Debt solutions may affect your credit rating. Last reviewed Week commencing January 2026.