What is an Individual Voluntary Arrangement (IVA) and how does it affect me?

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An Individual Voluntary Arrangement is a formal insolvency solution that sits between informal debt management plans and full bankruptcy, offering a structured, legally binding way to deal with unmanageable debt while avoiding some of the more severe consequences of bankruptcy. **How an IVA is set up** An IVA must be arranged through a licensed Insolvency Practitioner, who assesses your income, essential living costs, and debts, then proposes a formal repayment plan to your creditors -- typically an affordable monthly payment based on your genuine disposable income, sometimes alongside a lump sum if available (for example from equity release later in the arrangement). Creditors holding at least 75% (by value) of your debt included in the proposal must approve it for the IVA to become legally binding on ALL included creditors, even those who voted against it. **What happens once it is approved** Once approved, an IVA is legally binding, meaning creditors included in the arrangement cannot take further legal action against you (such as pursuing a County Court Judgment or bankruptcy petition) for the included debts, provided you keep up your agreed payments. Interest and charges on the included debts are usually frozen once the IVA starts. **Typical duration and what happens at the end** Most IVAs run for five to six years (sometimes longer if property is involved and equity release is planned partway through), at the end of which any remaining balance on the included debts is usually written off, provided you have kept to the terms of the arrangement throughout. **Impact on your credit file** An IVA is recorded on your credit file and remains visible to lenders for six years from the date it started, regardless of whether you complete it early -- this will make it very difficult to obtain most mainstream credit, including many mortgages, during this period, and can affect existing credit arrangements such as overdrafts. **Impact on homeownership and property** If you own a property with equity, your IVA proposal will often include a term requiring you to try to release some of that equity (for example by remortgaging) in the final year or two of the arrangement, to increase the amount repaid to creditors -- if you cannot release equity (for example because you cannot get a suitable remortgage), the IVA term may be extended instead, typically by a further 12 months. **Impact on certain jobs and professional roles** Certain professions and roles -- particularly in financial services, and some other regulated occupations -- may require you to disclose an IVA to your employer or regulatory body, and in some cases an IVA (like bankruptcy) can affect your ability to work in specific regulated roles, so check your specific professional or contractual obligations before entering one. **Worked example** Someone with £30,000 of unsecured debt across several credit cards and loans, unable to maintain minimum payments, enters an IVA proposing to pay £300 a month for six years (a total of £21,600) based on their assessed disposable income. Creditors holding over 75% of the debt approve the proposal. After six years of maintained payments, the remaining balance (the difference between the £30,000 original debt and the £21,600 actually repaid, plus any interest already accrued) is written off. **Practical tip** Before entering an IVA, get free, independent debt advice (for example from a debt charity) to check whether a less severe option, such as a debt management plan, might be more appropriate for your circumstances, since an IVA is a serious, long-term commitment with significant credit file consequences.

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