Individual Voluntary Arrangement UK Guide (IVA Process, Costs, Alternatives)

How an IVA Works

An IVA is a formal insolvency procedure in England, Wales, and Northern Ireland (Scotland has a similar but separate process called a Protected Trust Deed). You propose a repayment plan to your creditors through a licensed Insolvency Practitioner. The proposal details your income, essential living expenses, assets, and how much you can afford to pay each month. Creditors vote on the proposal — if creditors representing 75% of your debt by value accept it, the IVA is approved and binds all creditors (including those who voted against it). During the IVA, you make affordable monthly payments (typically based on your disposable income). Any equity in your home must usually be released in year 4 or 5 — you may need to remortgage or make additional payments. At the end of the term (usually 5–6 years), any remaining unsecured debt is written off. You must not take out new credit over £500 without permission from your IP. Your name is added to the Individual Insolvency Register, which is publicly searchable.

IVA Costs and Fees

IVAs are not free. The costs are significant and are typically taken from your monthly payments before they are distributed to creditors. Typical IVA costs include: Nominee fee — £3,000–£4,000 for setting up the IVA and presenting the proposal to creditors. Supervisor fee — £2,000–£4,000 for managing the IVA over its lifetime. Disbursements — costs such as court filing fees, land registry searches, and insurance. Total fees can reach £6,000–£10,000, which are deducted from the funds you pay into the arrangement. This means that of your monthly payments, a significant portion goes to the IP rather than your creditors. Some IVA providers offer "fixed fee" or "no upfront cost" IVAs, but the fees are embedded in the payment structure. Before agreeing to an IVA, ask your IP for a full breakdown of all fees in writing. Compare quotes from multiple licensed IPs. The FCA requires fee transparency. StepChange and Citizens Advice can help you assess whether an IVA is cost-effective for your situation.

Impact on Credit File and Property

An IVA has a severe impact on your credit file. It stays on your credit report for 6 years from the date it starts (not from the date it ends). This means even if you complete the IVA in 5 years, it remains visible for another year. During this time, obtaining credit is very difficult — most mainstream lenders will reject applications. You may be eligible for a basic bank account (without overdraft) while in an IVA. Property implications — if you are a homeowner, you must usually release any equity built up in your home during year 4 or 5 of the IVA. If you cannot remortgage (likely, given your credit file), you may need to extend the IVA by 12 months or make additional payments. If you rent, your tenancy agreement may require you to inform the landlord. Some tenancy agreements prohibit tenants who are subject to an IVA. Check your rental contract. Your name appears on the Individual Insolvency Register, which is public and searchable by lenders, landlords, and employers (especially in financial services).

IVA Alternatives

Before committing to an IVA, explore alternatives that may be less damaging and less expensive. Debt Management Plan (DMP) — informal agreement with creditors to repay what you can afford. No fees (if using a charity provider like StepChange), no legal binding, but no debt write-off. Credits stay on your file but a DMP marker is less severe than an IVA. Suitable for debts under £15,000. Debt Relief Order (DRO) — for people with debts under £50,000, few assets, and low disposable income. Costs £90 upfront. Debts are written off after 12 months. Less severe than IVA but still impacts your credit for 6 years. Bankruptcy — more severe than IVA but may be appropriate for very high debts or if your IVA fails. Bankruptcy costs £680–£1,300 and lasts 12 months for discharge, but assets may be sold. Informal arrangement — negotiating directly with creditors using a free template letter. No formal process, no fees, but creditors are not obliged to agree. Breathing Space — the UK government scheme gives you 60 days of legal protection from creditor action while you arrange a formal debt solution. Always get free debt advice from StepChange, National Debtline, or Citizens Advice before choosing an IVA.

IVA Scams and Unregulated Providers

The IVA market attracts unregulated and potentially scam providers. Some companies charge upfront fees, promise unrealistic debt write-offs, or fail to explain the serious consequences of an IVA. The FCA regulates debt management firms, but some providers operate outside FCA oversight. Red flags: demands for upfront fees before an IVA is approved; promises of writing off 80%+ of your debt (while possible, depends on your circumstances); pressuring you to sign quickly; not explaining alternatives or the impact on your credit file. Always use a licensed Insolvency Practitioner — check the FCA register or the Insolvency Service's register of licensed IPs. The government-endorsed MoneyHelper service can connect you with reputable debt advisors. StepChange and Citizens Advice are free, impartial services that will recommend the best solution without selling you a product. Never pay for debt advice — free services are available.

FAQs

Can I keep my car in an IVA?

Yes, typically you can keep a car worth up to £5,000–£10,000 depending on your IP. If your car is worth more, you may need to sell it and buy a cheaper replacement. Cars needed for work (or if you have a disability) are usually protected.

What happens if I miss an IVA payment?

Missing payments can cause the IVA to fail. If you miss 2–3 payments, your IP may write to your creditors proposing the IVA be terminated. If it fails, your debts revert to the original amounts plus interest, and creditors can pursue full repayment, including bankruptcy.

Can I get a mortgage during an IVA?

Extremely difficult. Most mainstream lenders reject applications during an IVA. Some specialist lenders offer mortgages after 3–4 years of consistent IVA payments, but at very high interest rates. Most people wait until the IVA is removed from their credit file (6 years from start).

Does an IVA affect my job?

It depends. Some professions (accountants, solicitors, financial services managers) require notification of insolvency. Check your employment contract. Your IP must report the IVA to the Individual Insolvency Register, which employers can search.

Can I include all debts in an IVA?

Most unsecured debts can be included: credit cards, personal loans, overdrafts, payday loans, store cards, and utility arrears. Secured debts (mortgage, car finance) cannot be included. Student loans, court fines, child support, and benefit overpayments cannot be included either.