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Published 06 September 2022
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What Is an IVA?

Individual Voluntary Arrangements, or IVAs, are legal agreements that can help you pay off your debt at a more affordable rate. Read on to find out how they work and whether they could be an option for you.

An Individual Voluntary Arrangement (IVA) is a legal agreement between you and your creditors to help you repay your debts at an affordable rate.

IVA repayments are managed by an insolvency practitioner (usually a qualified lawyer or accountant). IVAs are only available in England, Wales and Northern Ireland. Scotland offers a similar debt management solution called a ‘protected trust deed’.

How does an IVA work?

An IVA is set up and managed by an insolvency practitioner. They work out your repayment plan, which will include details about how much you’ll pay each month and how long the plan will last. They also act as an intermediary between you and your creditors. Only 75% of your creditors need to agree to the repayment plan for the IVA to proceed.

Once your insolvency practitioner has proposed a repayment plan to your creditors and the terms of the IVA are agreed, you pay the insolvency practitioner each month and they are responsible for splitting the money between your creditors.

What debts can you include in an IVA?

Debts that can be included in an IVA are:

  • overdrafts
  • credit cards
  • store cards
  • catalogue payments
  • charge cards
  • payday loans
  • credit union loans
  • unsecured loans
  • arrears from previous utility suppliers e.g. gas, electricity and water
  • arrears from previous mobile phone, landline or broadband providers
  • debts secured against an asset that was repossessed, where some debt is still owed
  • council tax arrears
  • HM Revenue and Customs VAT, PAYE, self-assessment tax or National Insurance
  • debts you owe to family and friends

Priority debts are not included in an IVA. They count towards your monthly household expenses instead. Priority debts include:

  • mortgage
  • secured loans
  • rent and service charge arrears
  • current utility bills
  • current service providers
  • hire purchase payments
  • student loans
  • child maintenance
  • council tax (the current year if not in arrears)
  • court fines

How much does an IVA cost?

The cost of an IVA varies between insolvency companies. However, typically insolvency practitioners charge two fees for an IVA:

  • A set-up fee: This is the cost of arranging your IVA. Sometimes called a nominee fee, this will need to be approved by your creditors
  • A handling fee: A cost charged each time the insolvency practitioner processes your payment. Also known as a supervisor fee, it will be paid out of any remaining money once the set-up fee is paid

If you decide an IVA might suit you, it’s always worth getting quotes and estimates from several insolvency specialists to compare costs.

Does an IVA affect your credit score?

Having an IVA will negatively affect your credit score. That’s because an IVA shows that you’ve had difficulty keeping up with repayments in the past.

Lenders are reluctant to approve applications from high-risk borrowers, which may lead to an application being rejected or charged higher interest. An IVA stays on your credit file for six years from the date that your IVA was agreed.

» MORE: Can I get car finance with an IVA?

Do you have to declare an IVA to your employer?

Certain jobs may require you to declare an IVA to your employer. These include jobs in finance, law, property and accountancy. If you are unsure about whether you’ll need to disclose an IVA to your employer, it’s worth:

  • checking your employment contract
  • arranging a confidential meeting with HR
  • contacting your professional trade body
  • speaking to your trade union

Pros and cons of getting an IVA

Some of the advantages of getting an IVA include:

  • Affordable repayments: IVAs are designed to ensure that you can afford the repayments each month.
  • Asset protection: Your creditors won’t be able to sell assets, such as your home or car, if they are protected under an IVA.
  • It prevents your debt from increasing: Once an IVA is agreed, your creditors can’t add interest, late fees or other charges to the debt, which stops it from increasing.
  • You can pay off your debt: Your debt will be cleared in full once your IVA term comes to an end, even if the debt has not been paid in full.

Some of the drawbacks of getting an IVA to consider include:

  • Inflexible: If your circumstances change and you cannot make an IVA payment, you may have to declare bankruptcy.
  • Employment risk: You may not be able to continue working if you are a solicitor or accountant with an IVA.
  • Pension risk: If you receive income from a personal pension, you may have to pay some of it towards the IVA.
  • Banking restrictions: You will only be allowed to use a basic bank account during the IVA to avoid borrowing through an overdraft.
  • Credit score damage: Your credit score will be damaged significantly by an IVA, which will make it extremely difficult to take out a mortgage, loan or credit card. IVAs stay on your credit file for six years.

Should I get an IVA?

An IVA may be worth considering if you have a sizable amount of debt that you are not able to pay off. It may also be an option to consider if you would like to prevent creditors from taking your assets through bailiff action or repossession.

If you have the funds to repay your debts, alternative debt repayment options may be worth considering first. In any case, all options should be explored fully and great care should be taken before deciding on a course of action to take due to the inflexible nature of an IVA and the implications this can have.

Alternatives to an IVA

There are several alternative options to consider instead of going through with an IVA:

  • Debt charities: Speaking to debt charities, such as StepChange or National Debtline, can help you create a personal debt management plan or find the best solution to help you pay off what you owe.
  • Debt relief orders: A debt relief order freezes debt repayments and interest for 12 months, after which your debts may be written off if your financial situation does not improve.
  • Bankruptcy: Declaring bankruptcy means that you are legally classified as being unable to repay your debt. You will need to owe over £5,000, and it requires the value of your assets to be shared with your creditors.

You can apply online to become bankrupt in England and Wales, while you apply through the courts if you live in Scotland and Northern Ireland. For more information on trust deeds, bankruptcy or alternatives to an IVA in Scotland, visit Accountant in Bankruptcy (AiB), Scotland’s Insolvency service. and StepChange Scotland. For more on Northern Ireland, visit

Image source: Getty Images


  1. IVA Pros & Cons Debt Advice Bureau
  2. What is an IVA StepChange
  3. Clearing your debt with an IVA Experian
  4. Individual voluntary arrangements National Debtline
  5. Options for paying off your debts
  6. Bankruptcy nidirect
  7. Trust Deeds

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