IVAs: Individual Voluntary Arrangements

What is an IVA?

“IVA” means Individual Voluntary Arrangement: It is seen as an alternative to bankruptcy which was introduced in 1986. (Rather than simply writing off your debts, you pay what you can on a monthly basis). It is a five-year agreement between the borrower and their creditors and it is legally binding, making it different to a ‘Debt Management Plan’ -which also requires monthly payments to creditors, but is not legally binding.

Who would apply for an IVA?

Anyone with debts over £15,000, (sometimes £20,000) may be accepted for an IVA. People who would rather avoid bankruptcy may see this as the best alternative as it doesn’t look as serious on a credit file as creditors will appreciate that the customer did their best to repay their debts. They are available to those who live in England, Wales or Northern Ireland. They are not available to those who live in Scotland, where their closest ‘equivalent’ would be a ‘Protected Trust Deed’.

How can I apply for an IVA?

As an IVA is legally binding, it is advisable that anyone in financial difficulties consults a debt advisor that doesn’t stand to make any profit from the individual’s circumstances. Examples of trusted, government run third party debt management companies that have such advisors are: CCCS (consumer credit counselling service), Payplan, National Debt Line, Christians against poverty, CAB (citizen’s advice bureaux).

If you and your advisor agree that an IVA is the best option, you will be directed to an IVA company that will provide you with representation in the form of an Insolvency Practitioner (a solicitor or chartered accountant that will liaise with your creditors.)

What debts are IVAs able to clear?

IVAs can only help with unsecured debts; so, credit and store cards, overdrafts and unsecured loans including student loans.

Mortgages and any other loan that may be secured on property cannot be resolved through an IVA. Also rent and council tax arrears are excluded, along with court fines, parking/speeding tickets and Maintenance/Child support agency arrears.

In IVA advertising, some claims have been deemed unrealistic with regards to the amount of debt that can be written off, which the office of fair trade is looking into. However it is accepted that a realistic amount of debt that may be cleared at the end of the 5 year term, therefore ‘written off’ can be as much as 60% when an individual has larger debts.

Advantages and Disadvantages of IVAs


  • Those who have agreed to an IVA are more likely to be able to keep your house and car versus those who are granted bankruptcy.
  • Restrictions on a credit file following an IVA are tough, but not as tough as with bankruptcy and it will always be visible on a credit file.
  • If your creditors agree to the IVA, interest will be frozen on the affected credit facility for the full 5 years/as long as the minimum payments are being adhered to.
  • After the 5 year term of the IVA, any outstanding debt is cancelled.

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  • Disadvantages