What is an IVA? A Complete Guide to Individual Voluntary Arrangements

What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) is a legally binding debt solution between you and your creditors. It allows you to repay all or part of your debt over a set period, usually five to six years. Once approved by the court, your creditors must stick to the terms, and when the IVA ends, any remaining unsecured debt included in the plan is written off.

An IVA is flexible and can be structured as monthly repayments, a one-off lump sum, or a combination of both. While it can ease the pressure of multiple debts, it also comes with costs and risks that you should carefully consider.

IVAs are available in England, Wales, and Northern Ireland but not in Scotland.

Who Can Get an IVA?

You may qualify for an IVA if you meet these typical requirements:

• Owe money to three or more creditors

• Have unsecured debts of at least £15,000

• Can afford regular monthly repayments (usually £100 or more after essentials)

• Have a steady income that can support long-term repayments

If you receive irregular income, an IVA may not be suitable. However, you may also qualify if you can offer a lump sum upfront.

Debts Included in an IVA

You can use an IVA to manage most types of unsecured debt, including:

• Credit cards and store cards

• Council tax arrears

• Utility bills

• Unsecured loans or overdrafts

• Mortgage shortfalls

• HMRC debts (e.g., income tax, National Insurance)

• Catalogue or hire purchase balances

Debts Not Covered by an IVA

Some debts cannot be included in an IVA, such as:

• Secured loans and mortgages

• Rent arrears (unless your landlord agrees, which is rare)

• Child Support Agency (CSA) arrears

• Student loans

• Magistrates’ court fines

• TV licence arrears

• Certain types of car finance

• Social Fund loans

• Unpaid VAT

How an IVA Works

Role of the Insolvency Practitioner (IP)

Only a licensed insolvency practitioner (IP) can set up and oversee an IVA. They will:

• Advise you on whether an IVA is suitable

• Draft a proposal for your creditors

• Apply for an interim court order if needed (to stop bankruptcy proceedings)

Proposal and Approval

Your IP will review your finances, including income, expenses, savings, and assets, to create a realistic repayment plan. Essential assets, such as a vehicle needed for work, may be protected.

Creditors holding at least 75% of your total debt value must approve the proposal. Once accepted, the IVA becomes binding—even on creditors who voted against it.

Repayments

Payments can be:

• Monthly instalments

• A lump sum

• A mixture of both

Your IP will collect your repayments, deduct fees, and distribute the rest to your creditors. If you own property, you may need to re-mortgage towards the end of the term to release equity.

Pros and Cons of an IVA

Advantages:

• Stops legal action and creditor harassment

• A fixed end date, usually after 5–6 years

• Any remaining unsecured debts are written off

• Removed from the Insolvency Register three months after completion

Disadvantages:

• Professional fees can be high (around £5,000 on average)

• Failure to keep up with repayments may lead to bankruptcy

• May affect certain careers (e.g., accountants, solicitors, company directors)

• Could require re-mortgaging your home

• Recorded on your credit file for six years

IVA Costs

• Insolvency Practitioner Fees: Typically £5,000, covering set-up, court application, and management.

• How to Manage: Always compare multiple IPs. Some include fees in monthly payments, while others require part of the cost upfront.

What If You Can’t Keep Up?

If repayments are missed, your IP could terminate the IVA, and creditors may push for bankruptcy. However, not every failed IVA ends this way—it depends on creditor decisions.

Individual Voluntary Arrangement and Your Credit Report

• Remains on your credit file for six years.

• During this time, you may not borrow more than £500 without permission from your IP.

• After six years, the IVA is removed from your credit history, although some lenders may still ask about it.

Public Record

All IVAs are recorded on the Individual Insolvency Register, where they stay for the full duration plus three months after completion.

Car Finance and an IVA

Getting approved for car finance during or after an IVA can be challenging, but it’s possible. At Compass Vehicle Services, we specialise in car leasing for people with poor credit, including those with a current or past IVA.

When applying:

• Always inform us of your IVA status upfront.

• In some cases, your Insolvency Practitioner may need to give written consent before signing a lease agreement.

Our team can guide you through the process and help you find a leasing plan that works within your circumstances.

Should You Choose an Individual Voluntary Arrangement?

An IVA can be a lifeline for people with significant unsecured debt, but it’s not the right solution for everyone. Before committing, seek advice from an independent debt adviser to review all your options.

If you’re currently in an IVA and need a car, Compass Vehicle Services can help you secure affordable leasing—even when others say no.