Individual Voluntary Arrangement

How does Individual Voluntary Arrangement (IVA) work?

An IVA puts an end to worries about spiralling interest charges because when you enter an IVA all interest and charges on your debt are frozen so that the amount you owe does not increase.

This debt solution also enables you to avoid bankruptcy and gives you protection against creditors taking legal action against you while you sort your finances in a structured way. That means you no longer need to fear answering the phone or the door to creditors.

An IVA is designed to steadily reduce your debt so that by the end of the IVA period, which is normally five years but can be six, all debts covered by it have either been repaid or written off, leaving you free to make a fresh start.

Instead of juggling unaffordable debt payments to many creditors and having to scrape by every month just to survive, with an IVA you only have to make a single affordable payment and you will be afforded a reasonable sum each month for essential expenditure.

A licensed professional Insolvency Practitioner (IP) will work with you to draw up the terms of your IVA and will handle all direct contact with your creditors on your behalf. The IP will focus on securing agreement to the terms of the IVA from creditors accounting for 75% of your debt – once that is obtained you are afforded full legal protection from creditor action.

You make regular monthly payments at an agreed level to an Insolvency Practitioner (IP) who administers the IVA on your behalf and makes all the payments to your creditors. The IP will detail any fees or charges and explain how these work.

  • Step One

    Find a professional reputable Insolvency Practitioner, such as Carrington Dean, and have a meeting or call with them to discuss your financial circumstances. Obtain the full facts on all debt solutions open to you from your IP and then make an informed decision on whether an IVA is the right solution for you. You can use our debt calculator to find out an indicative minimum monthly payment for various debt solutions available to you. We request contact details so that we can contact you to go through a full income and expenditure, but there is no obligation to use this service.
    You can check that a firm is a member of the Insolvency Practitioners Association at their website.

  • Step Two

    Once you have decided you want to enter an IVA, work with your IP on a detailed list of your income, expenditure and assets. You will need to provide details of all of your outstanding debts, including how much you owe to each creditor. Your IP will then work out a repayment proposal to make to your creditors.

  • Step Three

    Your IP will handle all direct dealings with creditors on your behalf and will present a repayment proposal which, when it is agreed, will become legally binding on all parties - both you and your creditors. Creditors will be asked to vote on the IVA proposal - in order for it to go ahead, Creditors representing at least 75% of your total debts must vote in favour of it. Once the IVA is approved, creditors are unable to take any legal action against you to recover the debt and all interest and charges on the debt will be frozen. Your IVA will be added to the Individual Insolvency Register. It will be removed three months after the IVA ends.

  • Step Four

    Once the IVA is up and running, you are firmly on the road to resolving your debt problems because at the end of the IVA (which is normally five years but can be extended to six), all debts will either have been repaid or written off so you can no longer be pursued for that debt by Creditors. Once a year, the IP reviews your finances and an annual progress report is sent to you and your creditors. At the end of the IVA, your payments will be completed and you will officially be discharged from that debt.

Kinds of debts included in an Individual Voluntary Arrangement (IVA)

 Bank and Building society loans and overdrafts
Credit Cards
Personal Loans
 Store Cards
Home Shopping Catalogues
Charge Cards
Council Tax Arrears
Tax Debts
 Utility Bills

Mortgage debt is unlikely to be included – it is classed as secured debt as your home is held as a security against the debt you owe to your lender. Your IVA will take account of mortgage payments and other essential outgoings such as rent payments, factoring in how much you need to pay each month to safeguard your home.

If your home is worth significantly more than the amount you owe on the property, you may have to remortgage the house to release some of this value in order to repay your debts more quickly.

Individual circumstances vary and whether or not you may have to remortgage your property will depend on the value of your home, how much you owe on it and also whether your credit rating is sufficient to obtain a remortgage.


  • An IVA protects you from any legal action or harassment by Creditors.

  • It freezes interest and charges on your debts so they do not increase.

  • All debts covered by it will be repaid or written off when the IVA ends

  • An IVA enables you to avoid bankruptcy.

  • As long as you keep up payments, it offers more protection for your home.

  • You only have to make a single affordable payment towards your IVA.


  • It is a legal arrangement so it you do not stick to the terms of the IVA, you will lose protection from creditors.

  • If an IVA fails, the cost of it will be added to your overall debt.

  • Your IVA will be aded to the Individual Insolvency Register. However only limited details can be accessed and it will be removed three months after the IVA ends.

  • It may affect the terms of your employment or hire purchase agreements.