An Individual Voluntary Arrangement turns several debts into one affordable monthly payment for a set period. At the end, any remaining balance on the debts included is normally written off. Here is exactly what happens, from the first conversation to the final certificate.
An IVA is a formal agreement, set up by a licensed Insolvency Practitioner, between you and the people you owe money to. Instead of juggling lots of separate debts, you agree a single monthly payment based on what you can genuinely afford after your essential living costs.
That payment runs for a set term, usually five to six years. While it does, interest and charges on the included debts are normally frozen and those creditors stop chasing you. When you finish, the rest of what you owed on those debts is written off.
It only becomes binding once creditors representing at least 75% by value of the debt that votes agree to it. And it is a serious step, recorded on your credit file and a public register, so it is worth understanding the detail below before you commit to anything.
From getting advice through to the debt being written off, here is the full journey.
Before anything formal, you look at your full financial picture, ideally with a free, impartial adviser, to check whether an IVA actually suits you or whether another option would clear your debt more cheaply.
A licensed Insolvency Practitioner goes through your income and your essential spending to agree a monthly payment you can realistically keep up, without leaving you short on the basics.
The Insolvency Practitioner writes up a formal proposal, setting out what you will pay, for how long, and the fees involved, then sends it to everyone you owe.
Your creditors vote. If those holding at least 75% by value of the debt that votes agree, the IVA is approved and becomes legally binding on every creditor included, even any who voted against.
Once it starts, interest and charges on the included debts are normally frozen and those creditors stop contacting you. You pay one amount each month to your Insolvency Practitioner, who shares it out. Your situation is reviewed every year, so the payment can change if your income does.
When you have made all the agreed payments you receive a completion certificate, and any remaining balance on the included debts is written off. The IVA stays on your credit file for six years from the date it started.
Annual reviews. Your Insolvency Practitioner checks in once a year. If you earn more, you may be asked to pay a little more; if your income drops, they can ask your creditors to reduce or pause your payments for a while.
Windfalls. If you come into money during the IVA, for example an inheritance or a redundancy payment, it usually has to go towards your debts rather than stay with you.
If you are a homeowner. Near the end of the term you may be asked to release some of the equity in your home if you can remortgage. If that is not possible, the IVA is often extended by around twelve months instead.
Keeping up payments matters. An IVA is only as good as your ability to maintain it. Many do not run their full course, so the payment you agree to needs to be one you can sustain even if things get a little tighter.
The Insolvency Practitioner charges fees for setting up and running your IVA. The important thing to understand is that you do not pay these upfront. They come out of the monthly payments you were already going to make.
In practice, your early payments tend to go more towards the fees than towards your creditors, with the balance shifting over time. Your Insolvency Practitioner has to explain exactly what the fees are before you agree to anything, so always ask them to walk you through the figures.
Because the fees are significant, an IVA is rarely the cheapest route for smaller debts. For some people a Debt Relief Order or a free Debt Management Plan works out far less expensive, which is why it is worth comparing your options first.
Both outcomes are worth understanding before you start, so there are no surprises later.
Use the IVA calculator to see a rough illustration based on your own debt and what you could afford each month. It is a guide, not a quote, and an IVA is not right for everyone.
You never have to pay anyone to understand your options. These organisations are free, independent and will go through every route with you, no selling involved.