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What is an IVA?

If you have any experience with debt problems, it is likely you have seen the term IVA crop up. An IVA (individual voluntary arrangement) is a formal and legally binding agreement between you and your creditors to repay your debt over a period of time. Once an IVA is in place, it stops creditors who are part of the arrangement from taking any further legal action against you.

Let’s take a look at how you can get an IVA and what it means if you do.

How do you get an IVA?

If you are unable to make the full repayments on the debt you owe, you may need to consider an IVA. An IVA will put in place an agreement with your creditors to repay your debt over a period of time (typically five years). 

There are typically some qualifying criteria. You may need to prove that you have a regular and predictable income in order to set up an IVA. This is because an IVA requires you to make a set number of payments over a long period. It is also helpful if you have at least £100 a month in disposable income. Alternatively, you can sell something or remortgage your home in order to raise a lump sum to contribute towards the IVA.

First things first though, as an IVA needs to be set up by an insolvency practitioner and approved by a court. Your insolvency practitioner will work out what you can afford to repay and the period of time it will take you to repay your debt. 

It is worth knowing that an IVA will start if the creditors holding 75% of your debt agree to it. Any creditors who disagree, but are in the minority, will then be required to adhere to the IVA. 

Also, a CCJ (county court judgement) can be included in your IVA. This means that if you have a CCJ in place, once your IVA starts, all debt repayments will be made through the IVA.

How does an IVA work?

As mentioned above, your insolvency practitioner will work out how much you can afford to repay each month and over what period of time, and this will be agreed between you and your creditors. 

As for the practicalities, you will make your monthly payments to your insolvency practitioner, who will then distribute the money among your creditors. Once you have completed your IVA and repaid your debt, you will receive a completion certificate. Three months later, the record of your IVA will be removed from the Individual Insolvency Register.

A word of warning: as with any financial commitment, there are repercussions if you miss payments. Your insolvency practitioner can cancel the IVA if you do not keep up your repayments, and therefore make you bankrupt.

Is an IVA the right move?

Whether or not an IVA suits your situation is down to your personal circumstances. The benefit of an IVA is that it gives you more control than bankruptcy (largely relating to if you own property or a car), but an IVA is not without risks.

Any savings or personal pension plans you have will usually be used to pay your creditors, and if you own property you may be required to remortgage it.

Having an IVA will  impact your ability to apply for credit in the future, although some credit cards are designed for those with bad credit and may still consider your application.

Also, insolvency practitioners’ services don’t come for free. Insolvency practitioner fees average around £5,000, but this will be rolled into your monthly payments.


If you have found yourself in a spiral of debt, an IVA gives you a structured repayment plan and freezes your existing debt. Although there are risks and an IVA can be costly, it allows you to have more control than if you were made bankrupt.

The upside is that once you have completed your IVA, it is removed from the Individual Insolvency Register. While you may have to declare an IVA when applying for some financial products, the end result is hopefully that you are debt free and looking ahead to the future.

Have you had an IVA in the past but still want a credit card? Take a look at our pick for cards designed for those with bad credit

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