Why is this important?

The information we provide differs between countries. To get information for your country, please select from the dropdown.

Individual voluntary arrangements (IVAs)

This information applies to England and Wales

About individual voluntary arrangements (IVAs)

If you're in debt, you'll need to take steps to sort it out. One option you may have open to you is to arrange an Individual Voluntary Arrangement (IVA).

An IVA is an alternative to bankruptcy. It's a formal arrangement between you and your creditors, the people you owe money to. It allows you to pay back all or part of your debts over a fixed period of time, typically five years.

IVAs aren't suitable for everyone. They only cover certain types of non-priority debt such as overdrafts, unsecured personal loans and credit card accounts. They are also only suitable for people who:

  • have spare income of £200 or more a month
  • owe money to two or more separate creditors. Debts owed to the same creditor don't count as separate debts
  • are unable to stick to the original agreement to pay back the money they owe.

If you want to do an IVA, you will need to find a registered insolvency practitioner who will help you put together a plan for sorting out all your non-priority debts. This plan is called a proposal.

The insolvency practitioner will call a creditors' meeting where your creditors will vote on whether to accept the proposal.

If enough creditors vote in favour, the proposal is accepted.

The outcome is reported to a court which will approve the IVA.

Once the IVA is approved, your insolvency practitioner is responsible for making sure that all sides keep to the agreement and taking action if they don't.

As long as you stick to the agreement, your creditors can't take action against you.

However, your home and other things of value you own (your assets) may still be at risk, even if you have agreed an IVA with your creditors.

There are other options for sorting out your debts besides IVAs. For more information about these, see When is an IVA a good option.

Back to top


What type of debts do IVAs cover

IVAs only cover debts to non-priority creditors. This includes debts like:

  • benefits overpayments
  • credit debts such as overdrafts, unsecured personal loans, credit card accounts and catalogues
  • hire purchase. If the hire purchase is for an essential item such as a car to help a disabled person get about, you can try to negotiate with creditors to have it left out of the IVA
  • water and sewage charges
  • student loans
  • money borrowed from friends or family
  • parking penalties issued by local authorities.

IVAs don't cover debts to priority creditors. This includes debts like:

  • mortgages
  • loans secured against your home
  • council tax arrears
  • rent arrears
  • court fines
  • maintenance or child support arrears
  • income tax, VAT or TV licence arrears.

If you have priority debts, you should make sure you have enough money to pay these  off first, before thinking about whether to arrange an IVA.

For more information about how to sort out your debts, including what counts as priority and non-priority debts, see How to sort out your debts.

Back to top


When is an IVA a good option

An IVA is an alternative to bankruptcy. It can be a better option than bankruptcy if:

  • your money problems are temporary or short term
  • you don't want to make yourself bankrupt
  • to avoid a creditor making you bankrupt
  • to save things of value (your assets), which you would lose if you went bankrupt.

IVAs aren't suitable for everyone. They only cover certain types of non-priority debt such as overdrafts, unsecured personal loans, credit card accounts and catalogues. If you have priority debts such as mortgage, rent arrears and hire purchase arrears, you will need to make other arrangements to pay these off.

There are certain other conditions you have to meet before you can do an IVA. You'll only be able to do an IVA if you:

  • have spare income of £200 or more a month
  • owe money to two or more separate creditors. Debts owed to the same creditor don't count as separate debts
  • are unable to stick to the original agreement to pay back the money you owe.

Before deciding to do an IVA, it's a good idea to look at what other options you have for sorting out your debts so that you choose the one that's best for you. Some options to think about are:

If you're finding it hard to work out what's the best way for you to sort out your debts, you can get help from a specialist money adviser at your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Sometimes a court can suggest you have an IVA instead of going bankrupt. For more information about when this might happen see the factsheet about

Fast-Track Voluntary Arrangements on the  Insolvency Service website at: www.bis.gov.uk/insolvency.

Back to top


How IVAs work

If you think an IVA is a good option for dealing with your debts, you will need to find a registered insolvency practitioner who is willing to act on your behalf.  Insolvency practitioners are usually a qualified accountant or solicitor. Often, the initial work is done by an IVA company with an insolvency practitioner supervising the final arrangements.

The insolvency practitioner or IVA company will help you put together a plan for sorting out all your non-priority debts. The plan, called a proposal, will be based on information you give to the insolvency practitioner. In the proposal, you will agree to repay the people you owe money to (your creditors), either  in part or in full, over a certain period of time. This is usually a period of five years.

If necessary, the insolvency practitioner can ask the court to make an interim order. This prevents your creditors from taking action while you are preparing your proposal. This can help if a creditor is threatening to take action against you, such as making you bankrupt.

The insolvency practitioner will prepare a report for the court, including their opinion on whether the proposal will work. They will then call a creditors' meeting where your creditors will vote on whether to accept the proposal.

If enough creditors vote in favour, the proposal is accepted. The creditors voting in favour must be jointly owed at least 75% of your total debt.

Example:

You have a total of £100,000 debt.  You have three creditors:

  • Creditor A (£6,000)
  • Creditor B (£70,000)
  • Creditor C (£20,000)

Creditor C doesn't agree to an IVA but it doesn't matter because Creditors A and B do agree and between them, they have more than 75% of the debt.  Creditor C still has to keep to the terms of the IVA.

The IVA becomes binding on the creditors entitled to vote at the creditors' meeting. The outcome is reported to a court which will approve the IVA. You usually don't need to attend.

Once the IVA is approved, your insolvency practitioner is responsible for making sure that all sides keep to the agreement and taking action if they don't.

You make your repayments to the insolvency practitioner who deducts their fees and then passes on the rest to your creditors. As long as you stick to the agreement, your creditors can't take action against you.

Some insolvency practitioners may ask for fees up front. Make sure you check this before you choose one.

Back to top


How an IVA affects your home

Most IVA agreements include a requirement for you to get a valuation of your home in the final year. If there is equity in the property, you'll usually need to raise a lump sum towards the IVA by re-mortgaging your home. Equity is the money you'd make from the sale of a property, after any mortgage or secured loans are paid off.

The money from the re-mortgage is paid into the IVA and your monthly contributions under the IVA are reduced to allow for your increased mortgage costs.

If your contributions in the final year of the IVA are reduced to less than £50 a month because of the re-mortgage costs, the IVA is completed and doesn't go into the final year.

You shouldn't have to sell your home to raise the lump sum. If you think you are being asked to sell your home, get specialist advice straight away.

If you can't re-mortgage, you'll continue to pay the usual monthly contributions under the IVA for twelve months instead.

If you own your home, make sure your IVA provider explains about raising a lump sum before you agree to the IVA. If you're not sure whether your IVA includes this option, read the agreement carefully or ask your IVA provider to explain it to you.

You can get advice about how an IVA affects your home from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Back to top


How an IVA affects your future credit

The Individual Insolvency Register is a public record of all IVAs held by the Insolvency Service. Your IVA will appear on the register until the IVA ends. You can view the register on the IS website at: www.bis.gov.uk/insolvency.

Credit reference agencies keep a record of your IVA for six years and it may affect your ability to borrow money.

For more about credit reference agencies and what things affect your ability to borrow money, see How creditors decide to lend to you.

Back to top


How to find an insolvency practitioner

IVAs are provided by individual insolvency practitioners and firms employing insolvency practitioners. Insolvency practitioners must be registered before they can do IVAs.

You can find a registered insolvency practitioner by searching the insolvency practitioner database on The Insolvency Service website at www.bis.gov.uk/insolvency.

In England and Wales, you can also get a list of  insolvency practitioners  from the local court dealing with bankruptcy or from your local Official Receiver's office. You  can get the address of your  local office from the Insolvency Service website at www.bis.gov.uk/insolvency.

Back to top


How to Choose an IVA practitioner

There are lots of IVA providers and it can be very difficult to decide which one to use. Here's some tips for what to think about to help you choose:

  • make sure the insolvency practitioner or firm is authorised to do IVAs
  • look for an IVA provider that offers a free first interview, so if you decide not to go ahead you won't have wasted any money
  • don't feel pressured into agreeing something on the spot. Take whatever time you need to make your decision and take information home with you to read in comfort
  • if you're not sure about something, don't be afraid to ask questions. An IVA is a legal process. It's important that you fully understand what you're agreeing to
  • check how much the IVA will cost and when you'll have to pay any fees. Some companies ask for fees up front. You may prefer fees to be deducted from your regular payment instead
  • always read any papers carefully before signing anything. If you're not sure about anything it's better to get advice from a specialist adviser first.

You can get advice about IVAs and choosing an IVA provider from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Back to top


Paying for your IVA

Insolvency practitioners charge fees for arranging and managing IVAs. The fees may be taken from the regular payments you make so you won't notice that you're paying anything.

Beware of IVA firms that charge upfront fees before they even do any work for you. There are plenty of insolvency practitioners and firms who don't ask you to pay up front, so you don't need to go with one that charges in this way.

Make sure you know how much you're going to be charged and when you'll be expected to pay, before you agree to anything.

Back to top


What if you don't keep to the arrangement

If you don't keep to the arrangement you've made, the insolvency practitioner or any of the creditors can ask the court to make you bankrupt.

If you're threatened with bankruptcy because your IVA has failed, you can get advice from a specialist adviser, for example at your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Back to top


What if your circumstances change during the IVA

If your situation changes during the IVA period you must tell the insolvency practitioner straight away. You may be able to ask your creditors to consider a new proposal.

IVAs often set down what happens to the arrangement if there's a change of circumstances. It's worth asking the insolvency practitioner about this when discussing an IVA.

If you've already got an IVA, look at the original agreement to see if it tells you what will happen if things change. If you're not sure, ask your insolvency practitioner to explain it to you.

Back to top


Complaining about an IVA provider

If you have a complaint about an IVA provider, you should first complain to the company or insolvency practitioner concerned and give them a chance to put things right.

If you're still not satisfied, you can complain to the organisation which authorises the insolvency practitioner.

You can get a leaflet, How to complain against an insolvency practitioner, from the Insolvency Service website at: www.bis.gov.uk/insolvency.

Back to top


Further help and information

On Adviceguide

Insolvency Service

The insolvency service is the government department that deals with insolvency matters in England and Wales. This includes IVAs and bankruptcy.  For more information about IVAs, including the online IVA register, visit the Insolvency Service website at: www.bis.gov.uk/insolvency.

Back to top


Rate this page Give feedback