What is an IVA?

If you're struggling with debt or finding it difficult to pay back your loans and credit cards, you might choose to enter into an Individual Voluntary Agreement. This, also known as an IVA, is one method of managing your debt.

    How does an IVA work?

    An Individual Voluntary Agreement is designed to repay your debt, for a set length of time, at rates you can afford.

    You'll go through a budgeting process, working out how much you can realistically afford to pay back each month. Then, you'll pay this until you reach the end of the arrangement.

    Once you've reached the end of your IVA, any remaining debts are written off. This is a way of partially clearing your debts, whilst stopping your creditors from pursuing you for repayments once you've come to the end of your agreement.

    How does the IVA process work?

    You can only get an IVA through a qualified insolvency practitioner.

    Before putting forward any offers to your creditors, you will need a financial review. This takes into account all of your income, expenditure and assets, to see what you can reasonably afford.

    Once you've put forward your offer, your creditors can choose to accept or reject your proposal. In many cases, they'll accept. You can choose to pay all of your money in one go, which is known as a Lump Sum IVA, or to make monthly repayments over five or six years.

    How long does an IVA last?

    Most people enter into an Independent Voluntary Agreement that lasts for around 5 years. Some are slightly longer. Usually, an IVA is agreed on 60 or 72-month terms.

    What happens if my IVA is rejected?

    Occasionally, creditors will reject an IVA. This might happen because they don't agree to the size of the monthly repayments, or the overall amount of money that they'll receive by the end of the agreement.

    An IVA is activated once creditors holding at least 75% of the total debt value have approved your offer.

    If your IVA is approved, even those who rejected the IVA will become a part of the agreement. However, in some cases, you won't gain approval from the required 75%.

    If your IVA isn't approved, you will likely not be forced into bankruptcy straight away. Instead, you will still owe money and can take some time to decide your next steps. You may choose to file bankruptcy, or to look into other ways of paying your debts until they're cleared. You can also choose to submit a new IVA proposal, if you can find a way to offer more money and make the IVA more appealing.

    Do I qualify for an IVA?

    Your IVA is likely to be accepted by creditors if you meet certain requirements.

    Generally speaking, you should owe several thousand pounds worth of debt – to multiple creditors – and can afford to make minimum monthly repayments. For example, if you owe more than £15K in total – and can afford repayments equivalent to at least £200 per month – you should write off around £3,000 worth of debt (20%) once the IVA ends.

    Realistically, creditors will want to receive as much of their money back as possible. An IVA is more likely to be rejected if they're losing out or would benefit more from bankruptcy.

    IVAs are available to residents of England, Wales and Northern Ireland only.

    An Individual Voluntary Agreement is designed to repay your debt, for a set length of time, at rates you can afford

    Can I settle my IVA early?

    You can make an early IVA settlement offer if you have funds available and if your creditors agree to accept this. This may not be for the full amount of money that they would get back if your IVA ran to completion, but could still be accepted to settle the IVA early. Creditors are more likely to accept the offer if it's a generous one.

    You may be able to resettle early if you've received money through inheritance, released equity through the sale of property, or even won a significant sum of money.

    Advantages of an IVA

    • As an alternative to bankruptcy, an IVA is better for homeowners. Whilst bankruptcy often requires debtors to sell their homes, with an IVA you might only be asked to remortgage it. If you can't remortgage, you may be required to extend your IVA by a year.
    • With an IVA, unless you have a very valuable vehicle, you will be allowed to keep it.
    • Once you have completed your IVA, all remaining debt is written off. You'll receive a Certificate of Completion and can no longer be chased for any money that you once owed to creditors.
    • During your IVA, your creditors are not allowed to contact you. If you've been receiving letters, phone calls and other forms of debt chasing contact, then these should stop once your IVA is active.

    Disadvantages of an IVA

    • An IVA will not necessarily cover all of your debts. It doesn't help to clear hire purchase agreements, mortgages, student loans, TV licence arrears, child support arrears, or court fines, for example.
    • An IVA may affect your job. It is a form of insolvency which might cause problems if you have a senior role, or work as a Company Director.
    • An IVA will be recorded on your credit file. It will usually remain there for the full length of your agreement, and often slightly beyond.
    • If you enter into an Individual Voluntary Agreement, your name will be published on the public Insolvency Register.

    Is an IVA right for me?

    If you think an IVA is right for you, then contact us today for a no-obligation chat about your circumstances. Alternatively, if you’re still unsure about the effect an IVA can have, read our customer stories to find out how this arrangement benefited them: