Glossary · UK
What is Individual Voluntary Arrangement (IVA)?
A formal agreement between an individual and their creditors to repay debts, usually over 5 years. An alternative to bankruptcy overseen by an insolvency practitioner.
Full Definition
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between a debtor and their unsecured creditors to repay all or part of their debts over a fixed period, typically 5 years (6 years if you own a home with equity). An IVA can only be set up by a licensed Insolvency Practitioner (IP), who acts as the supervisor of the arrangement and who must get approval from creditors holding at least 75% of the debt by value. Once approved, the IVA binds all included creditors, even those who voted against it. The debtor makes a single affordable monthly payment to the IP, who distributes funds to creditors. Creditors generally agree to write off any debt that remains unpaid at the end of the arrangement. The IVA is recorded on the Individual Insolvency Register and on your credit file, where it typically stays for 6 years from the start date, making it difficult to obtain credit during that period. Compared to bankruptcy, an IVA allows you to retain assets such as your home (provided you can remortgage or make additional payments if you have equity) and your business, and avoids the other restrictions that come with bankruptcy. IVA fees, paid to the IP from your monthly contributions, can be substantial. Anyone considering an IVA should first seek free advice from a debt charity such as StepChange or Citizens Advice.