Answers · UK 2025/26
How does an Individual Voluntary Arrangement (IVA) work in the UK?
An IVA is a formal insolvency agreement between you and your creditors, supervised by a licensed insolvency practitioner. You make fixed monthly payments for typically 5–6 years; remaining eligible debt is written off at the end. It protects you from creditor action while active.
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**What is an IVA?** An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your unsecured creditors, set up by a licensed insolvency practitioner (IP). It is governed by the Insolvency Act 1986 and provides a structured route to deal with unmanageable debt without declaring bankruptcy. **How it works** Your IP assesses your income and essential expenditure, then proposes a monthly payment plan to your creditors. Creditors holding 75% or more of the debt value must vote to approve the arrangement. Once approved, it binds all unsecured creditors — even those who voted against. **Typical example: James, 38, with £35,000 unsecured debt** James owes £35,000 across credit cards and a personal loan. His IP calculates he can afford £450/month after essential bills. Over 60 months (5 years) he repays £27,000 total. The remaining £8,000 is legally written off when the IVA completes successfully. **What debts are included?** Credit cards, personal loans, overdrafts, store cards, and HMRC debts can typically be included. Secured debts (mortgage), student loans, child maintenance, and court fines are excluded. **Key protections during an IVA** Once your IVA starts, creditors cannot take further legal action, apply for a charging order, or continue bailiff action for debts included in the arrangement. **Impact on credit and assets** An IVA appears on your credit file for six years from the start date and is recorded on the Insolvency Register. You may need to release equity from your home in year five if you own property. Certain professions (e.g. solicitors, accountants, IFAs) may be affected — check with your regulator. **Costs** IP fees are paid from your monthly contributions, not on top. Typical nominee fees are £1,000–£2,500 and supervisor fees are around 15–20% of realisations, but these come out of what you pay in. **Is an IVA right for you?** An IVA works best when you have a regular income, at least £6,000 of unsecured debt (typically more like £10,000+), and multiple creditors. For lower debts a Debt Relief Order (DRO) or debt management plan may be more appropriate.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.