What an IVA actually is
An IVA is a legally binding agreement between you and the people you owe. Instead of trying to pay everything, you agree to pay what you can genuinely afford:
- You make one regular payment each month to a licensed insolvency practitioner.
- They divide it between your creditors over 5 or 6 years.
- While you keep to the agreement, creditors freeze interest and charges, stop action and stop contacting you.
- At the end, any remaining unsecured debt in the IVA is written off.
Why people choose it
An IVA can wipe out debt you could never realistically clear, in fixed affordable payments, while protecting you from further action — without the full effects of bankruptcy. For the right person, it’s a genuine fresh start.
How it’s approved — the 75% rule
The insolvency practitioner writes a proposal setting out what you’ll pay, and your creditors vote on it. If creditors holding more than 75% of your debt by value (of those who vote) accept it, the IVA is approved and becomes binding on all the creditors included — even ones that voted against. After that, they can’t chase you or add charges as long as you stick to the plan.
The catches — what they don’t put in the advert
| The catch | What it means |
|---|
| Fees | The insolvency practitioner charges fees, taken out of your monthly payments. They must tell you the fees before you agree. |
| Your credit file | An IVA stays on your credit record for 6 years and is listed on the public Individual Insolvency Register. |
| Your home | If you’re a homeowner, you may be asked to release equity (or pay longer) towards the end. |
| It can fail | If your circumstances change and you can’t keep paying, the IVA can fail — which can lead to bankruptcy, with the fees already paid. |
This is why free advice matters
An IVA is a serious, long commitment. A
Debt Relief Order (free, for people with low debt, few assets and little spare income) or a simple debt management plan might leave you better off and cost nothing. Only impartial advice on your full situation can tell you which is right.
The mis-selling warning — read this first
IVAs are aggressively marketed. You’ll see ads and get cold calls and texts promising to “write off up to 85% of your debt” or “one easy payment”. Many come from lead-generation firms that get paid for funnelling people into IVAs — whether or not it’s the best option for them.
- Get free debt advice first — from StepChange (0800 138 1111), National Debtline (0808 808 4000) or Citizens Advice. They compare every option, not just IVAs.
- Free charities can set up an IVA too if it really is right for you — without a sales pitch and without an upfront fee.
- Never pay a fee to start, and be very wary of anyone who contacts you out of the blue. If in doubt, check it.
Do this now
Before signing anything, make one free call — StepChange 0800 138 1111 or National Debtline 0808 808 4000. Ask them to compare an IVA with a Debt Relief Order and a debt plan for your exact situation.
If creditors are piling on the pressure right now, you can also press pause with Breathing Space while you get advice, and know your rights if bailiffs are involved.
Where IVAs apply
IVAs are for England, Wales and Northern Ireland. In Scotland the equivalent is a Protected Trust Deed — speak to a free adviser or Citizens Advice Scotland.
Is an IVA right for you?
An IVA can suit someone who:
- has a regular income and can afford to pay something each month, but not clear the debts in a reasonable time;
- has a meaningful amount of unsecured debt (credit cards, loans, overdrafts);
- wants to protect assets (like a home) better than bankruptcy might.
It may not be right if your debts and assets are low and your spare income is tiny — a Debt Relief Order could be cheaper and quicker — or if you could clear your debts with a bit of breathing room and a debt plan. The honest answer always comes from free, impartial advice based on your whole picture.