What you need to know about individual voluntary arrangements (IVAs)

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What is an IVA?

When a consumer gets into debt they can't afford to repay under the terms of their loans, they have a few options to consider. Most of us are aware of bankruptcy as a last-ditch solution to debt problems, but there is also the option to opt into individual voluntary arrangements, or ‘IVAs’.

IVAs aren't suitable for everyone, but they can offer a solution to a debt problem that can help you avoid bankruptcy and the associated long-term damage to your credit file. Here we look at IVAs in detail, including how to get one, how you can find out if they are suitable for you and how much they cost.

What is an IVA?

An IVA is a legally binding agreement between a creditor (someone who lends money, including payday loans, bank loans, store cards and car finance) and a debtor (someone who owes money). IVAs can be put in place to help a debtor settle their debt over a longer period, repaying only what they can realistically afford to pay each month until the debt is cleared or the IVA term is over. Sometimes, the entire debt won't be covered by the IVA.

Both the debtor and the creditor need to agree to the terms of the IVA and both parties must stick to the agreement. Therefore, if you are a debtor, you need to make the agreed repayments on time for the entire term of the IVA. The creditor, meanwhile, won't pursue you for larger amounts or request unscheduled payments, for example.

While an IVA is a form of insolvency, it is different in several ways from bankruptcy. However, it is important to remember, that an IVA cannot be set up for student loans, fines (such as parking tickets or speeding fines for example) or child support. IVAs should not be seen as an alternative to repaying one’s debts. It is always preferable to repay your loans and debts, rather than seeking an alternative arrangement such as an IVA. For example, you may have a few loans outstanding, such as credit cards, a short-term loan and others.

How does an IVA work?

An IVA is put into place by an insolvency practitioner. Once you’ve signed up for an IVA you are legally obliged to make repayments every month for several years. The period over which an IVA extends is usually between 5 and 6 years, and you’ll be committed to repaying as much as you can afford to repay every month.

If you come into money while you’re in an IVA, some or all of this money can be taken from you to repay your creditors. An IVA is a long-term commitment and may affect your income from jobs and any windfall you receive over the years that it's active.

How long does an IVA last?

Individual Voluntary Arrangements (IVAs) usually last between 5 to 6 years, although the terms may be extended if you fail to make the payments. During this time, the individual must commit to making regular monthly repayments to clear their debt.

How are IVAs different from debt relief orders?

Debt relief orders are an option for some people who have debts lower than £30,000 and have less than £75 available each month to make repayments. You can only qualify for a debt relief order if you have no assets that could be used to help repay a debt. Debt relief orders generally don't require you to make repayments to your creditors and your debt is usually written off at the end of the debt relief order period. Debt relief orders harm your credit rating and will make it more difficult for you to obtain credit.

Is an IVA suitable for me?

IVAs are generally more suitable for people with larger debts. If you owe upwards of £10,000 to more than one creditor, on an unsecured basis, an IVA can help you to make sure your loans are paid off and will help to get your creditors off your back. Importantly, you’ll need to have spare money available to pay off your debts to qualify for an IVA. If you have no spare money once your essential costs are taken into account, an IVA is probably not the best solution for you.

In most cases, you won’t be expected to repay everything you owe, just as much as you can afford, as calculated by an insolvency practitioner, for around six years. If you would like help repaying your unmanageable debt with lower monthly payments over the years, an IVA may be right for you. They can also be useful for people who struggle with contacting their creditors and who would prefer all dealings with creditors to be taken out of their hands and handed over to a professional insolvency practitioner.

It's very easy to get bogged down by unmanageable debt, particularly if it’s spread over several loans, store cards, credit cards and specialist lenders. Lots of people find that they take on debt that they simply can't afford to service each month along the terms they initially agreed to. With an IVA, your debt is consolidated and the actual repayments are taken out of your hands and your money is distributed to your creditors on your behalf.

How do you get an IVA?

You can’t apply for or arrange an IVA yourself. You'll need to appoint an insolvency practitioner to help you agree to an individual voluntary arrangement between you and your creditors.

Insolvency practitioners either work as part of an organisation offering debt solutions or they work as individuals. An IP will take responsibility for your IVA and will try to ensure that it works for all parties involved, including the debtor.

An IP’s job, when it comes to IVAs, is to get as much money back for the creditors without putting undue financial pressure on the debtor. Instead, they will take a careful look at a debtor’s financial situation and come up with a proposal that will need to be agreed to by all parties involved.


You can use this free government portal to find your insolvency practitioner. It’s best to avoid businesses that offer this service at a further cost.

How does an IVA affect my credit score?

As with bankruptcy and other similar arrangements, an IVA does negatively affect your credit score because it shows creditors that you have struggled to repay your debts in the past.

How long does an IVA stay on your credit file?

An IVA appears on your credit file for 6 years after the date of your commencement, even if you manage to complete your payments beforehand. Since creditors will be more hesitant to lend to you, you are also likely to have very little credit activity for 6 years, which makes it difficult to improve your credit score during this time.

It may be the case, however, that you are eligible for bad credit loans, and so this should be considered if you require a short-term loan during those 6 years of the IVA.

One way to improve your credit score is to repay the IVA, avoiding bankruptcy and having the IVA marked as completed on your credit file.

Hence, before arranging an Individual Voluntary Agreement (IVA), you should first understand the associated risks. You may have to remortgage your home or contribute your savings and personal pension payments. You may also have trouble borrowing money for proceeding years, and most importantly if you cannot keep up with repayments, a failed IVA can lead to bankruptcy and further financial woes.

Is an IVA better than bankruptcy?

Although IVA payment plans are longer than bankruptcy payments, there are some tangible benefits to choosing an IVA. Generally speaking, IVAs are much more discreet than bankruptcy. While bankruptcy can for example be published in local newspapers, an IVA appears publicly only in the Individual Insolvency Register. Additionally, an IVA will likely not affect your career.

Bankruptcy, on the other hand, may impact your eligibility in certain positions. IVAs also allow you to keep more of your assets than bankruptcy would allow. A person who has declared bankruptcy has to release equity over £1,000 and may have to sell his home. A person with an IVA does not have to sell their home and has to release equity over £5,000.

IVA debt help: IVA alternatives and where to get advice

It’s really important to seek out impartial debt advice if you’re in debt and are considering an IVA. Stepchange.org offer free advice and will be able to provide some insight into whether they feel an IVA might be helpful or not, depending on your specific circumstances.

If you decide an IVA isn’t right for you for one of the reasons we have already touched upon in this blog, then all is not lost. If you’re struggling with debt, there are options available to you that may end up being less expensive than an IVA.

Here’s our list, but it's important to talk about these options with an impartial debt adviser to help you figure out what’s right for you.


  • A debt relief order

  • Administration order

  • Bankruptcy

  • A debt consolidation loan

  • A debt management plan


Living with debt you can't afford can make you miserable. Here at Moneyboat, we’re dedicated to responsible lending, which involves ensuring that every single one of our borrowers can afford the repayments we agree on for the entire term of their loan. However, there are all kinds of reasons that people find themselves with unmanageable unaffordable debt and, these days, there are solutions that can help you.

In pressing financial situations, consider the benefits of taking a short-term loan with Moneyboat.


Short-term loans are more expensive than ‘traditional options’ and borrowing money from your family and friends, and they do not serve as a long-term solution for enduring financial troubles. However, our loans can help you get out of a pressing financial bind.

Representative Example: Borrow £400 for 4 months, 4 monthly repayments of £149.37. Total repayment £597.48, interest rate p.a. (fixed) 255.5%. Representative APR 939.5%.
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Warning: Late repayments can cause you serious money problems. For help, go to www.moneyhelper.org.uk.

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Representative Example: Borrow £400 for 4 months, 4 monthly repayments of £149.37. Total repayment £597.48, interest rate p.a. (fixed) 255.5%. Representative APR 939.5%.Compare Moneyboat loans.

Warning: Late repayments can cause you serious money problems. For help, go to www.moneyhelper.org.uk.

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