What is an IVA and how does it work?
Quick Answer: An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to repay a portion of your debts over a fixed period.
An IVA is one of several formal insolvency solutions available in England, Wales, and Northern Ireland. It was introduced under the Insolvency Act 1986 and is designed to help people who are struggling with unmanageable debt.
The process begins when you contact a licensed Insolvency Practitioner (IP). They will carry out a full assessment of your financial situation - your income, essential living costs, and total debts. Based on this, they will determine whether an IVA is suitable and what you can realistically afford to pay each month.
Your IP then prepares a formal proposal and presents it to your creditors at a meeting (usually virtual). For the IVA to be approved, creditors representing at least 75% of your total debt (by value) must vote in favour. Once approved, the IVA is legally binding on ALL your unsecured creditors - even those who voted against it.
During your IVA (typically 5-6 years), you make one fixed monthly payment to your IP, who distributes it among your creditors. Interest and charges are frozen, and creditors cannot take legal action against you for the debts included in the arrangement.
At the end of the IVA term, any remaining balance on the included debts is legally written off. You are then debt-free from those debts, although the IVA will remain on your credit file for 6 years from the start date.
* This information is for general guidance only and does not constitute financial advice.