What is an IVA? Individual Voluntary Arrangement Explained [2026]

14 min read · UK focused · Updated 16 Aug 2026

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to repay what you can afford over a fixed term — usually 60 months — through an Insolvency Practitioner. At the end, remaining eligible unsecured debt is written off. It is a formal insolvency solution for UK residents, so it binds creditors once approved but stays on your credit file for six years.

If your debts have grown beyond what you can realistically repay, an IVA is one of the formal solutions you will be offered — often aggressively, because commercial firms earn fees from setting them up. This guide explains, objectively, what an Individual Voluntary Arrangement actually is and how it works in the UK, exactly what it costs, which debts it can and cannot include, how it affects your credit score for six years, and — crucially — when it is the right choice and when a self-directed payoff plan would serve you far better. An IVA is a serious, binding commitment, so the goal here is to help you understand it well enough to get free advice and decide with your eyes open.

What is an IVA?

An IVA is a formal, legally binding agreement between you and your creditors to repay part of your debt over a set period — usually five to six years — after which the rest of your eligible unsecured debt is written off. It is administered by a licensed Insolvency Practitioner and governed by the Insolvency Act 1986.

An Individual Voluntary Arrangement is a form of personal insolvency available in England, Wales and Northern Ireland. (Scotland has an equivalent called a Protected Trust Deed, with different rules.) In simple terms, you agree to pay a fixed, affordable amount each month — or sometimes a lump sum — and in return your creditors agree to freeze interest and charges, stop chasing you, and write off whatever eligible debt is left at the end. Once approved, it is legally binding on all included creditors, even the ones who voted against it. That legal force is the key thing that separates an IVA from an informal arrangement like a Debt Management Plan.

An IVA sits in the middle of the formal insolvency options. It is less drastic than bankruptcy — it is designed to let you keep your home and avoid the restrictions of a bankruptcy order — but more serious than a DMP, which is not legally binding and repays your debt in full. Because it can write off debt, an IVA is only appropriate when you genuinely cannot repay everything you owe within a reasonable time, and it commits you to years of tightly budgeted payments.

How does an IVA work?

You apply through a licensed Insolvency Practitioner, who assesses your income and expenditure and proposes a monthly payment to your creditors. Creditors vote, and if those holding 75% or more of your debt (by value) agree, the IVA is approved and binds everyone. You then make fixed monthly payments, typically for 60 months.

The process follows a clear sequence:

1. You appoint an Insolvency Practitioner. Only a licensed IP can set up and run an IVA. They review your full financial position — income, essential living costs, debts and any assets — and work out what you can realistically afford to pay each month after essentials.
2. The IP drafts a proposal. This sets out how much you will pay, for how long, and what percentage of the debt creditors can expect to recover. It also details the IP's fees and any assets (such as home equity) that may be brought in later.
3. Creditors vote. At a creditors' decision procedure, your creditors vote on the proposal. It is approved if creditors representing 75% or more of the total debt (by value) of those who vote agree. Because approval is by value, a few large creditors effectively decide the outcome — and once it passes, every included creditor is bound, including any who voted no.
4. You make fixed monthly payments. Your single monthly payment goes to the IP (the "supervisor"), who distributes it to creditors on a pro-rata basis. Interest and charges are frozen, and creditors must stop enforcement action.
5. The IVA runs its term. A standard IVA lasts 60 months (five years). If you are a homeowner and cannot release equity near the end, it is commonly extended to 72 months (six years) instead. Your circumstances are usually reviewed annually, and your payments can go up or down if your income changes.
6. Completion and write-off. Once you have made every agreed payment and met every condition, the IP issues a completion certificate. Any remaining eligible unsecured debt is written off, and you are legally released from it.

Throughout, you are expected to live within a set budget and not take on new borrowing above £500 without permission. An IVA is not a quick fix — it is a multi-year commitment that only works if the monthly figure is genuinely affordable for the whole term.

How much does an IVA cost?

You do not pay separate fees on top of your monthly payments. The Insolvency Practitioner's fees — a nominee fee for setting the IVA up and a supervisor fee for running it — are taken out of the payments you already make, so they come from the money creditors would otherwise receive, not from your pocket as an extra charge.

This is one of the most misunderstood parts of an IVA, and firms sometimes blur it deliberately, so it is worth being precise. There are two IP fees:

• The nominee fee covers the work of drafting the proposal and putting it to creditors.
• The supervisor fee covers administering the IVA — collecting and distributing your payments and reviewing your circumstances — over its full term.

Both fees are deducted from the monthly payments you make, not added to them. In other words, if you pay £180 a month, that £180 already includes the IP's fees; the fees reduce how much of each payment reaches your creditors, rather than increasing what you pay. That is very different from a paid DMP, and it means an IVA is not something you "buy" with an upfront fee.

Because of this, you should never pay a company an upfront fee to "set up" or "check your eligibility" for an IVA. Free, regulated advice on whether an IVA is right for you — and help arranging one where it genuinely is — is available from StepChange and Citizens Advice. If a firm asks for money before anything happens, treat it as a warning sign and walk away.

What debts can be included in an IVA?

An IVA covers unsecured debts only — credit cards, personal loans, overdrafts, catalogue and buy-now-pay-later balances, payday loans and most benefit overpayments. Secured debts, student loans, court fines, child maintenance and debts arising from fraud cannot be included.

Getting this distinction right matters, because debts left out of the IVA still have to be paid separately on top of your IVA payment.

The rule of thumb is that an IVA deals with the same family of non-priority, unsecured debts that a DMP or the snowball method target, plus some HMRC debt — but it cannot touch secured borrowing or the handful of debts the law protects from write-off. You must include all your eligible unsecured debts in the proposal; you cannot pick and choose which creditors to bind.

How does an IVA affect your credit score?

An IVA severely damages your credit rating. It is recorded on your credit file for six years from the date it starts, listed on the public Insolvency Register while active, and restricts you from borrowing more than £500 without permission. Getting a mortgage, loan or new card during those six years is very difficult.

An IVA has one of the heaviest credit-file impacts of any debt solution short of bankruptcy. Three things happen:

• A six-year mark on your credit file. The IVA is registered with the credit reference agencies (Experian, Equifax and TransUnion) and stays there for six years from the start date. Because a standard IVA lasts five years, it typically drops off roughly a year after you complete it. Unlike a default, it does not need each debt to default separately — the arrangement itself is the marker.
• The public Insolvency Register. While your IVA is active, your name and details appear on the Individual Insolvency Register, which anyone can search. Your details are removed about three months after the IVA ends.
• Borrowing restrictions. While the IVA runs, you cannot take on credit of more than £500 without your IP's permission, and in practice most lenders will decline you anyway.

There is also a specific consequence for homeowners: in the final year of a typical IVA you may be required to release equity from your property by remortgaging, up to a capped amount. If you cannot (for example, because you lack the equity or cannot get a remortgage), the usual outcome is that the IVA is extended by 12 months instead — which is why homeowner IVAs so often run to six years. This protects your home from being sold, but it does tie up a portion of its value in the arrangement.

The practical upshot is that an IVA buys you a binding freeze and a debt write-off at the cost of six years of very limited credit access. That trade-off is worth it when the debt is genuinely unpayable — but it is a poor trade if you could have cleared the debt yourself without ever marking your file.

IVA vs other debt solutions

An IVA is one of several UK debt options, and it is rarely the only one that fits. The right choice depends on how much you owe, whether you own a home, whether you have spare income, and whether you need debt written off at all. The table below is a quick orientation; each option has a dedicated guide.

For a full side-by-side of the three formal insolvency routes — including exact eligibility limits and costs — see the companion guide, IVA vs DRO vs Bankruptcy. If your debts are still affordable and you are weighing an informal arrangement, the DMP guide covers that route, and the debt snowball method covers clearing the debt yourself. To see how the numbers play out on your own balances, the snowball vs avalanche calculator shows how quickly a positive budget surplus clears debt without any formal solution at all.

When is an IVA the right choice?

An IVA can be the right choice when you owe roughly £10,000 or more across several creditors, cannot realistically repay it all within a reasonable time, but can afford a stable monthly payment of around £100 or more — and you want to protect your home from the risk that bankruptcy carries.

Consider an IVA when most of these are true:

• You have significant unsecured debt — typically £10,000 or more — spread across multiple creditors.
• You cannot clear it within a few years even with strict budgeting, so some write-off is genuinely needed.
• You have a stable income and can commit to an affordable fixed payment (often quoted from around £100 a month) for five to six years.
• You are a homeowner or have assets you want to protect, and bankruptcy's exposure of your home is unacceptable to you.
• You do not qualify for a cheaper, faster Debt Relief Order (which is aimed at lower debts, no home and very little spare income).

Where an IVA earns its place is the combination of a binding freeze on interest, protection for your home, and a defined end date after which the remaining debt is gone. For the right person — serious, unpayable debt plus a home to protect and a steady income — that package is hard to beat. But that is a specific profile, and the only way to know whether you fit it is to get free advice from a regulated source before committing.

When should you avoid an IVA?

Avoid an IVA if your debt is manageable through a self-directed payoff, if you have minimal assets to protect, or if you could realistically clear what you owe within two to three years on your own — because in those cases an IVA imposes six years of credit damage you did not need.

An IVA is over-sold, so it is just as important to know when it is the wrong tool:

• Your debt is still affordable. If you can meet your minimum payments and have something spare each month, you do not need a formal solution. The snowball method will clear the same debts while keeping your credit file clean.
• You have minimal assets. The main advantage of an IVA over bankruptcy is protecting a home or significant assets. If you rent and own little, that advantage largely disappears, and a DRO or bankruptcy may be cheaper and quicker.
• You could clear the debt in 2–3 years. Locking into a five- or six-year arrangement to repay debt you could have cleared independently in a fraction of the time is a poor trade — you would carry the credit-file mark for years longer than the debt would have lasted.
• Your income is unstable. An IVA that fails partway through can leave you worse off — interest and charges added back on and creditors free to pursue you again. If you cannot be confident of the payment for the whole term, it is high-risk.

The single most useful thing you can do before deciding is work out your real monthly surplus, because that one figure tells you which side of the line you are on. If it is comfortably positive, you almost certainly do not need an IVA.

Try the snowball calculator on your debts →

Free IVA advice — where to get help

Never pay for IVA advice. Free, impartial and regulated help is available from StepChange, Citizens Advice, National Debtline and MoneyHelper. They can tell you honestly whether an IVA, another formal solution, or a self-managed plan is best for your situation — with no commercial incentive to sell you one.

Because commercial IVA firms are paid to set IVAs up, they have an incentive to recommend one even when a cheaper option would suit you better. That is exactly why you should start with a free, regulated charity, which has no such incentive:

• StepChange — free debt advice and, where appropriate, free IVA and DMP administration.
• Citizens Advice — free, impartial advice on every debt option and your rights.
• National Debtline — free telephone and online debt advice.
• MoneyHelper — the government-backed service explaining and comparing debt solutions.
• The Insolvency Service (GOV.UK) — the official source on IVAs, DROs and bankruptcy.

Frequently asked questions

Sources & further reading

1. The Insolvency Service (GOV.UK) — official guidance on IVAs, DROs and bankruptcy.
2. StepChange Debt Charity — how IVAs work and free IVA administration.
3. MoneyHelper (Money & Pensions Service) — IVAs explained and compared with other options.
4. Citizens Advice — free, impartial debt advice.
5. Financial Conduct Authority (FCA) — regulation of debt-solution providers (CONC).

Sources are provided for reference and were current when this guide was last reviewed; figures, thresholds and rules change over time — always check the original. DebtSnowball.co.uk is independent and not affiliated with these organisations.