What is an IVA?

IVA stands for Individual Voluntary Arrangement. It is a legally binding agreement between you and your creditors to repay your debts over a fixed period, usually 60 months (5 years). At the end of this period, any remaining debt is written off.

For example, if you owe £30,000 across credit cards and loans but can only afford £200 per month, an IVA would let you pay £200 monthly for 60 months (total £12,000). The remaining £18,000 would be written off at the end. Your exact payments depend on your income and outgoings.

An IVA can be a good idea if you have unaffordable unsecured debt over £6,000, can afford regular payments of at least £100 per month, and want protection from creditors while keeping your home. However, it will affect your credit rating for 6 years and requires commitment to 60 monthly payments.

An IVA is set up by a licensed Insolvency Practitioner who negotiates with your creditors on your behalf. You make one affordable monthly payment based on your disposable income. Interest and charges are frozen. Creditors cannot contact you. After 60 months, remaining debt is legally written off.

You do not pay upfront fees for an IVA. The Insolvency Practitioner fees are taken from your monthly payments. Typically, the first few payments cover setup costs, then the rest goes to your creditors. The total you pay depends on what you can afford, not the IVA fees.

An IVA can include most unsecured debts: credit cards, personal loans, overdrafts, store cards, catalogue debts, payday loans, and some HMRC debts. Secured debts like mortgages and car finance cannot be included and continue as normal. You must include all your unsecured debts.

In most cases, no. An IVA is designed to help you keep your home. However, if you own property with significant equity, you may need to remortgage in the final year to release some equity. If remortgaging is not possible, your IVA may be extended by 12 months instead.

For an IVA to be approved, creditors holding at least 75% of your total debt value must vote in favor. If this threshold is met, all creditors are bound by the IVA terms, even those who voted against it. Most IVAs are approved because they offer creditors more than they would get through bankruptcy.

An IVA affects your life in several ways: your credit score is impacted for 6 years, making it harder to get credit or mortgages; you must stick to a strict budget with monthly payments for 5 years; some professions restrict IVAs (check your employment contract); you cannot take further credit over £500 without IP approval; however, you gain peace of mind with creditor protection and a clear path to becoming debt free.

Downsides of an IVA include: 6-year negative credit file impact, difficulty getting mortgages or loans during this time, 60 months of strict payments, potential need to release home equity in year 5, restrictions on credit over £500, possible extension if you miss payments, IP fees taken from payments, and public record on the IVA register. However, for many, the debt write-off and creditor protection outweigh these disadvantages.

After 5 years (60 months) of an IVA, once you complete all payments, any remaining debt is legally written off and you receive a completion certificate. Your IVA is marked as completed on the insolvency register. However, it stays on your credit file for 6 years from the start date. After 6 years total, it is removed from your credit file and you can rebuild your credit score. You are then completely debt free.

Yes, there is an IVA register called the Individual Insolvency Register, maintained by the Insolvency Service. All IVAs are publicly listed on this register while they are active. The register shows your name, address, date of birth, and IVA details. Your IVA remains on the register until completion, then for 3 months after. Anyone can search this register online. This is one reason some people prefer a Debt Management Plan, which is not registered publicly.