IVA's Explained | allthelenders
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IVA’s Explained

In this article:

What does IVA stand for?

IVA stands for Individual Voluntary Arrangement.

Can I apply for an IVA anywhere in the UK?

An IVA is available if you live in England, Northern Ireland, or Wales. In Scotland an IVA is known as a Trust Deed.

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What is an IVA?

An IVA is a formal agreement that you enter into with your creditors. Creditors, in financial terms, are persons or companies that you owe money to. An IVA agreement is an alternative to bankruptcy and enables someone who has financial difficulties to clear debts at a defined amount they can afford over a specific period. Your assets are protected if your creditors accept your IVA proposal.

Can I arrange my own IVA?

An IVA must be arranged with a qualified person. They will typically be a qualified accountant or a solicitor/lawyer. The person who is legally allowed to deal with your debts and propose settlements is known as an insolvency practitioner.

What does an insolvency practitioner do?

An insolvency practitioner will act as your nominated representative. They will explain the pro’s & cons of entering into an IVA and will help you draft a proposal for your creditors that you are able to afford and continually maintain. They will negotiate (and renegotiate if necessary) with your creditors on your behalf to agree the amount you will need to repay.

How long does an IVA last for?

A typical IVA usually last for 5 years (60 months). The rules are different if you own a property as you will be expected to relinquish some of the equity in your asset. If it is not possible to release equity then you will need to make a further 12 months’ worth of payments into your IVA, meaning the duration becomes 6 years (72 months).

What debts can be included in an IVA?

All common types of debt can be included in an IVA. These include overdrafts, credit cards debts, personal loans, utility bills & arrears, store cards, catalogue debts and payday loans. Other secured debts (like mortgages) and some other debts (student loans, child support, fines) will have to be paid for outside of the IVA.

What are the benefits of an IVA?

  • An IVA is meant to be an affordable solution. You will only have to pay what is within your means. Your chosen insolvency practitioner will review your finances and help you calculate what you can afford to pay each month & submit this recommendation to your creditors.
  • With an IVA there is no more debt. Once your creditors have agreed to the IVA it cannot be changed. As long your IVA agreement is maintained, your creditors are not allowed to chase you for money.
  • Your assets still belong to you as your IVA protects them. Your creditors cannot force you to sell an asset.
  • No legal action, threats or any direct communication. Once an IVA is agreed your creditors are no longer to able to pursue you, threaten court action or take legal action against you. All correspondence must be through your insolvency practitioner.
  • IVA’s are not placed on public record so no-one will be able to know about your financial situation unless you want them to know.
  • Job protection – An IVA will not affect the job you do or any job you would like to apply for.

What are the negatives of an IVA?

  • If you have an IVA this will have a significant impact on your credit rating for at least 5 years. Having a poor credit rating will make it extremely difficult to get any credit.
  • You must disclose ‘Windfalls’. In an IVA agreement, you must declare any financial windfall you receive, and you will be expected to contribute this to your creditors.
  • Your financial status will be reviewed every year and you will be required to adjust your payments if they are affordable.
  • If you have an IVA you will only be allowed a basic bank account (No overdraft or credit facilities will be given to you).
  • You will be expected to manage your finances in an extreme way which will be subject to review for the duration of your IVA.

Will my IVA be accepted by my creditors?

For a proposed IVA to be accepted, at least 75% (in financial value) of the creditors must accept your proposal. Once they have, it’s legally binding and they can’t pursue you any longer for any money or interest due.

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What happens if I break the terms of my IVA?

It goes without saying that if you break the terms of the agreement that your creditors have a legally binding contract to be able to pursue you for the debt. It is paramount that you stick to the terms of the agreement.


An IVA is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. If your proposal if accepted, it is approved by the court and your creditors must stick to it by law. An IVA can be flexible to suit your specific requirements, but it can be expensive and there are risks that must be considered. You should always seek professional advice from a qualified expert.