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Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and the people you owe money to. They are also known as your creditors.

It means you are insolvent and cannot pay your debts.You need the help of an insolvency practitioner (IP) to set up an IVA. This solution is available in England, Wales and Northern Ireland.

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IVAs are arranged by StepChange Voluntary Arrangements, part of StepChange Debt Charity. In Scotland, a protected trust deed is a similar solution. This has different benefits, risks and fees.

An IVA works in two ways

  • The first way is to pay monthly amounts based on what you can afford. This usually lasts five or six years
  • The second way is to pay back what you owe with one large amount of money, called a 'lump sum'

This can work if you do not have much money left over in your monthly budget but have items of value (assets) to sell. These are things like a house or a car.

By selling assets, you could use the money to deal with your debts quicker.

Your advisor will explain your options.

Once your creditors agree to your IVA, they need to stop contacting you. They cannot take any legal action.

They can still send you standard messages like advertising and monthly statements.

Once successfully completed, creditors write off any leftover debts included in the IVA.

Fees are detailed in your IVA proposal, which an IP will assist in drafting. Any fees have to be approved by creditors. Your IP will explain what fees you need to pay for your IVA.

Clare Lindley and James O'Carroll of StepChange Voluntary Arrangements are licensed to act as insolvency practitioners in the UK by the Insolvency Practitioners Association.

Video: What is an individual voluntary arrangement (IVA)?

An individual voluntary arrangement, or IVA, is a form of insolvency, and it can be a good way of repaying your debts at a rate that you can afford.

An IVA shows your creditors you’re insolvent. In other words - you can’t repay your debts in a reasonable amount of time. But, there's no expectation that you’ll have to sell your home, and you might not have to sell any of your assets or items of value, such as a car if you have one.

To be eligible for an IVA you need to show that you don't have enough money to pay your normal monthly debt repayments, and that the amount of debt you have is more than any assets and equity you have in your home.

Instead, once you’re on an IVA you’ll make monthly payments for five or six years. There’s also something called a one-off lump sum IVA, where you make a one-off payment, and you can find out more about these on our website.

For an IVA to go ahead, 75% of your creditors need to agree to the proposal. This works on a value basis, so for example if you owe 50% of your debt to one creditor, their share of the vote is 50%.

IVAs are only available in England, Wales and Northern Ireland. If you live in Scotland, we’d suggest looking at some of the alternative options, including some solutions that are specific to people living in Scotland – again you can find out more about these on our website.

So let’s go through some of the benefits and risks of a standard IVA

When it’s approved, an IVA gives you protection from your creditors. They’ll stop contacting you and they won’t add any more interest or charges to any debts that are included in it.

And at the end of the IVA, any money left to pay off on the debts included in your IVA will be written off, as long as you’ve made all of the payments that you agreed.

So that hopefully sounds good. However, it’s important for you to understand the risks that you’ll need to consider before taking out an IVA. IVAs are a form of insolvency, they’re legally binding, and they must be arranged through an Insolvency Practitioner.

The budget you agree with your Insolvency Practitioner should be affordable for the full term of the IVA, however if your financial circumstances change the IVA can be adapted.

If you go on an IVA, a reference to it will be added to your credit file. This’ll stay on your record for six years and will make it more difficult for you to get further credit during your IVA and once it’s finished.

You’ll also need permission to take out any credit over £500. This is really important to remember, as if you do this without getting permission, your IVA could be cancelled. This also applies to borrowing money from family and friends.

Additionally, your name will be added to an insolvency register. This can be read online if someone looks for it, but it’s unlikely someone would stumble across it, and it shouldn’t appear in online search results for your name.

If you’re a homeowner, you may also need to try to release equity through a re-mortgage. If you can do this, your IVA will probably last for a total of five years. If you’re unable to do this, it’s likely you’ll need to make another year’s payments instead.

There is also a risk that if your IVA fails for any reason, there is a risk of bankruptcy.

There are also fees involved with setting up an IVA, and these are included in the amount you pay. This does mean that there aren’t any upfront costs, and if your IVA isn’t approved then you won’t have any fees to pay at all.

And finally, it's very important to get expert debt advice to make sure that an IVA is suitable for you, and your individual circumstances.

We offer free debt advice both online, and over the phone. We'll help you put together a realistic budget and then recommend the most suitable debt solution for you.

If an IVA is a solution that’s appropriate for your situation, we'll help you set it up and be here to support you every step of the way.

Benefits of an IVA

  • You pay a single monthly amount. This is based on what you can afford
  • There are no set up fees to be paid before your IVA is agreed
  • Your remaining debts are written off after you make your final payment. This means you do not pay them back
  • Interest, charges and debt collection stop. This means the amount you owe stops getting bigger
  • Your insolvency practitioner deals with creditors on your behalf
  • Creditors included in your IVA cannot to take legal action against you

Risks of an IVA

  • Your creditors could ask you to reduce living costs they feel are too high
  • You may have to sell any valuable assets you own
  • If you own property, you may need to remortgage and pay the money as a lump sum into the IVA

If you do not finish your IVA:

  • None of your debts will be written off
  • You will have to pay them all back
  • Your creditors will contact you again
  • Your creditors can add any missed interest and fees
  • There is a chance you could be made bankrupt

Evie on Feefo says:

"Having all my debts coming out in one lump sum and cheaper than trying to pay all my credit cards separately is perfect, I finally have some of my own money to contribute towards bills and no longer needing to borrow money from friends and family."

Get help like Evie

How to apply for an IVA

Use our free online advice tool or call us to speak to an advisor.

 If an IVA is right for you:

  • StepChange Voluntary Arrangements (StepChange VA) will get in touch
  • They will double check that an IVA is a good fit
  • They will do the paperwork and set up your IVA
  • They will support you through the whole process

Frequently asked IVA questions

Use our free online debt advice tool to find out if an IVA could help you.

An IVA may work if you can afford to pay something to your debts, but not the full amount your creditors want.

An IVA is a form of insolvency and is managed by an insolvency practitioner (IP).

You pay an affordable monthly amount for five or six years. Your payments include the fees for managing the IVA.

If you own items of value, your advisor may speak with you about selling them. You would then pay the money raised as a lump sum into your IVA.

At the end of the IVA, any leftover debts are written off.

An IVA can impact your personal, professional and financial life.

Consider the risks carefully before applying and get expert debt help.

Ready to find out if an IVA is right for you?

An IVA shows on your credit file for six years.

It shows publicly on the Individual Insolvency Register until three months after your IVA ends.

During this time you will find it harder to get credit.

If you have any joint or guaranteed debts, you need to let the other people know about your IVA.

You will no longer have to pay back the debt, but creditors could take action against the other person if payments are not made up.

That means it could affect the other person’s credit file too.

StepChange Voluntary Arrangements IVA costs and fees follow industry standards.

  • There are no upfront fees
  • Fees are taken from your payment
  • This does not affect the time it takes to pay back what you owe

Other IVA companies may charge different fees. It is important to check and understand them before going ahead.

All fees are agreed by you and your creditors before an IVA is approved.

If at any time you decide not to go ahead with an IVA with us, there will be no fees to pay.

There are some jobs you cannot have during an IVA.

These are often jobs where you are in control of other people’s money, like certain legal jobs and roles in banks and financial services.

Before you apply for an IVA, you should find out if there are any risks to your job. You can do this by:

  • Checking the terms and conditions of your employment contract
  • Speaking to your employer, trade union or professional body

Once the IVA is approved by your creditors, they will stop contacting you and cannot take any legal action against you.

They can still send you marketing messages and monthly statements.

Our individual voluntary arrangement (IVA) guides

Explore our individual voluntary arrangement guides for advice on the entire process.

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We have helped millions of people since 1993.

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"Stepchange helped me a lot "

"Every month I used to stress because I knew I would have nothing left over to my name. Now I only give the amount I can really afford to my creditors. BIG THANKS TO STEPCHANGE."

Mohammed, Feefo Review

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StepChange Voluntary Arrangements is a registered trading name of Consumer Credit Counselling Service Voluntary Arrangements Limited, a wholly owned subsidiary of StepChange Debt Charity.