Pillar Guide · Updated July 2026
UK Individual Voluntary Arrangement (IVA): A Complete Guide for 2026/27
An Individual Voluntary Arrangement can offer a structured way out of serious unsecured debt without the full severity of bankruptcy, but it is a formal insolvency procedure with real long-term consequences that deserve careful understanding before signing up. This guide explains how an IVA is approved, what it typically costs, how it affects your credit file and mortgage prospects for years afterward, and what happens if payments are missed or the arrangement fails.
What Is an IVA
An Individual Voluntary Arrangement is a formal, legally binding insolvency procedure under the Insolvency Act 1986 in which a person agrees to repay some or all of their unsecured debts over a fixed period — typically 5 years — through monthly payments (or sometimes a lump sum), administered by a licensed insolvency practitioner acting as supervisor.
Once approved, the IVA is binding on all creditors included in the proposal, including those who voted against it or did not vote at all, provided they were properly notified. In exchange, included creditors agree to stop pursuing the debtor directly — no further calls, letters or legal action — for the debts covered by the arrangement, provided the debtor keeps up their agreed payments.
An IVA is distinct from informal options such as a Debt Management Plan (a voluntary, non-binding arrangement that creditors can choose to opt out of at any time) precisely because of its formal, legally binding nature once the 75% creditor approval threshold is met.
Who Is Eligible
There is no statutory minimum or maximum debt threshold, but in practice IVAs are generally proposed for total unsecured debts from roughly £6,000-£10,000 upward, since insolvency practitioner fees need to be proportionate to the debt being restructured — very small debts are usually better handled through simpler routes such as a Debt Relief Order or informal negotiation.
A workable IVA proposal depends on the debtor having a reasonably stable income — whether from employment, self-employment or other regular sources — sufficient to fund a realistic monthly payment for the full term. Creditors assess the proposal specifically on whether the projected return compares favourably to the alternative of bankruptcy, so a proposal offering an unrealistically low or unsustainable payment is unlikely to gain the required approval.
Secured debts, such as a mortgage or car finance agreement secured against the vehicle, are not included in an IVA and must continue to be paid in full and on time outside the arrangement — an IVA covers only unsecured debt such as credit cards, personal loans, overdrafts, and certain other unsecured liabilities.
The Approval Process
A licensed insolvency practitioner prepares a detailed IVA proposal, reviewing the debtor's income, essential expenditure, assets and debts, and setting out a proposed monthly contribution and term. This proposal is sent to all known creditors ahead of a creditors' decision process — usually conducted by correspondence or electronically rather than an in-person meeting in modern practice.
Approval requires creditors representing at least 75% by value of the total debt who actually vote to vote in favour of the proposal. If approved, the arrangement becomes legally binding on every creditor that was properly notified, including any who voted against it or abstained — this “cram-down” effect on dissenting minority creditors is one of the IVA's key legal features and a major reason it can succeed where informal negotiation with every individual creditor might not.
Insolvency Practitioner Fees
IVA fees typically comprise a nominee fee (for preparing and proposing the arrangement) and an ongoing supervisor fee (for administering it over the term, including distributing funds to creditors and handling annual reviews). These fees are usually built into the debtor's monthly payment rather than charged as a separate upfront cost, meaning a portion of each month's contribution goes toward IP costs before the remainder reaches creditors.
Fee structures, and the proportion of each payment allocated to costs versus creditor distributions, vary between IVA providers, so comparing more than one firm — ideally alongside free advice from a debt charity — is worthwhile before committing to a specific proposal and supervisor.
Credit File and Mortgage Impact
An IVA is recorded on the debtor's credit file and the public Insolvency Register, and remains visible for 6 years from the start date regardless of how long the arrangement actually runs — a 5-year IVA that completes exactly on schedule is still visible for a further year after completion. This is longer than many people expect and should be factored into any decision.
During this period, obtaining new unsecured credit, a mortgage, and in some cases certain jobs or bank accounts requiring a credit check becomes significantly harder; some mainstream lenders will decline any application from someone with a recorded IVA even after it has completed and shows as satisfied. Specialist “adverse credit” mortgage lenders exist for those who need to borrow with a past IVA on their file, though typically at less favourable rates than standard mortgage products.
Missed Payments and Failure
Occasional missed payments are usually manageable if reported promptly to the supervisor, who has some discretion to agree a payment holiday or adjust the arrangement where the debtor has a genuine, temporary change in circumstances such as job loss or illness. Persistent, unexplained or unreported missed payments, however, can lead to the IVA being formally terminated.
If an IVA fails, creditors are no longer bound by the reduced or restructured terms and can pursue the original debt in full, including through further legal action or, in serious cases, a creditor-led bankruptcy petition. A meaningful proportion of IVAs do not run to full completion, most commonly because of a genuine change in the debtor's circumstances during the multi-year term rather than wilful non-compliance — this underlines the importance of a realistic, sustainable payment being agreed from the outset.
Keeping Your Home
A mortgage is a secured debt and continues to be paid separately outside the IVA, so in most cases a homeowner can keep their property as long as mortgage payments continue as normal. However, standard IVA terms commonly include an equity release clause requiring the debtor to attempt to remortgage or take further borrowing against home equity in the final year of the arrangement, to increase the amount repaid to creditors.
If a mortgage lender will not offer additional borrowing on reasonable terms — a common outcome given the debtor already has an IVA on their credit file — the typical fallback in most standard IVA terms is to extend the arrangement by a further 12 months rather than force a property sale, though the exact wording varies by provider and should be checked carefully before agreeing to the proposal.
IVA vs Bankruptcy and Other Options
Bankruptcy is generally a shorter (around 12 months to discharge) but more severe form of personal insolvency, during which the Official Receiver can sell qualifying assets to repay creditors and significant restrictions apply, such as limits on running a business or acting as a company director. An IVA is a negotiated, longer-term alternative that typically allows the debtor to retain more control over their assets, including in many cases their home, and avoids some of the more severe restrictions associated with bankruptcy — though both are recorded on credit files and the public Insolvency Register.
Other options worth considering alongside an IVA include a Debt Management Plan (informal and non-binding, so creditors can opt out), a Debt Relief Order (for those with low income, low assets and lower total debt), and the government's Breathing Space scheme (a temporary, up to 60-day pause on enforcement and interest while the debtor gets advice and arranges a longer-term solution). Free, independent advice from a debt charity should always be the starting point for comparing these options against an individual's specific circumstances.