Individual Voluntary Arrangement (IVA) Guide (2026 Guide)

When Do You Need an IVA?

An IVA may be appropriate if you meet the following criteria:

• You owe significant unsecured debts — there is no legal minimum, but IVAs are generally used for debts of £10,000 or more. For smaller debts, a Debt Relief Order or informal repayment plan may be more suitable.
• You have regular income — IVAs are based on making monthly payments to your creditors over 5-6 years. You need a stable income to sustain those payments. If you have no income or very irregular income, an IVA is unlikely to work.
• You want to avoid bankruptcy — if you own a home, work in a profession that restricts bankrupts (such as law, accountancy, or financial services), or simply want to avoid the stigma and restrictions of bankruptcy, an IVA provides an alternative.
• You can offer your creditors a better return than bankruptcy — an IVA must be in the interests of creditors. If creditors would get more money through an IVA than they would if you were made bankrupt, they have an incentive to approve it.
• You are willing to commit to 5-6 years of reduced spending — an IVA is not a quick fix. You will be on a strict budget for the duration. Any surplus income goes to creditors.

An IVA is not suitable if your debts are very small (consider a DRO if under £30,000), if you have no income at all, or if your financial situation is so severe that even reduced payments over six years will not make a meaningful dent in what you owe.

What an IVA Involves

An IVA is a contract between you and your creditors, supervised by a licensed insolvency practitioner (IP) who acts as nominee (before approval) and then as supervisor (after approval). The arrangement is legally binding once approved.

Key features:

• Proposal: You (through your insolvency practitioner) prepare a formal proposal setting out how much you will pay each month, for how long, and what proportion of the debts this will repay. The proposal is a detailed document that complies with the requirements of the Insolvency Act 1986.
• Creditor meeting: Your creditors vote on the proposal. For the IVA to be approved, creditors holding at least 75% of the total debt by value must vote in favour. Each creditor’s vote is weighted by the amount they are owed.
• Monthly payments: Once approved, you make fixed monthly payments to the insolvency practitioner, who distributes the money to creditors according to the terms of the arrangement. Payments typically last five to six years.
• Creditor protection: During the IVA, creditors who are bound by the arrangement cannot take separate legal action against you for the debts included in it. They cannot issue court proceedings, send bailiffs, or petition for your bankruptcy (for those debts).
• Final settlement: At the end of the IVA term, if you have made all the required payments, any remaining balance on the included debts is written off.
• Failure: If you cannot maintain the payments, the IVA can be varied (with creditor agreement), or it can fail entirely. If an IVA fails, you are back where you started — or worse, because your creditors can then petition for your bankruptcy.

How to Set Up an IVA: Step by Step

1. Get Proper Debt Advice

Before pursuing an IVA, you should understand all your options. Free debt advice is available from StepChange, Citizens Advice, National Debtline, and other organisations. Do not go straight to a commercial IVA provider — some charge excessive fees and push IVAs when they are not appropriate.

2. Find a Licensed Insolvency Practitioner

An IVA must be set up and supervised by a licensed insolvency practitioner. IPs are regulated by one of several recognised professional bodies (including the Insolvency Practitioners Association, ICAEW, ACCA, and the Law Society). You can search for a licensed IP on the Insolvency Service website.

The IP will assess your financial situation and advise whether an IVA is viable. If it is not, a responsible IP will tell you so. Be cautious of firms that are overly enthusiastic about setting up an IVA regardless of your circumstances.

3. Prepare the IVA Proposal

Working with your IP, you will prepare a formal proposal to your creditors. The proposal must include:

• A full statement of your affairs — all debts, assets, income, and expenditure.
• The proposed monthly payment amount and the duration (usually 60 months, sometimes 72 months).
• The estimated dividend — the percentage of the total debt that creditors will receive over the term. For example, if you owe £40,000 and propose to pay a total of £18,000 over five years, the dividend is 45p in the pound.
• How the IP’s fees will be paid — the IP is paid from the monthly contributions, which reduces the amount available for creditors.
• Whether your home equity will be included — in many IVAs, you are required to remortgage in the final year to release equity for creditors, or make additional payments if remortgaging is not possible.
• Any special terms or conditions — for example, provisions for windfall payments (inheritance, PPI refunds) that must be paid into the IVA.

4. File the Proposal with the Court

The IP, acting as nominee, files the proposal and a report with the court under s.256 of the Insolvency Act 1986. This is a procedural step — the court does not decide whether to approve the IVA. That decision is made by the creditors.

Once the proposal is filed, the IP can apply for an interim order under s.252 of the Act. An interim order prevents creditors from taking enforcement action (including bankruptcy proceedings) while the proposal is being considered. However, interim orders are not always necessary and many IVAs proceed without one.

5. Creditor Meeting and Vote

The IP convenes a meeting of creditors (which is now usually conducted as a virtual meeting or by correspondence under the 2016 Rules). Creditors are sent the proposal and have the opportunity to vote.

For the IVA to be approved, creditors representing at least 75% of the total value of debts must vote in favour. If creditors representing more than 50% of the value are “connected” to you (for example, family members you owe money to), they are treated separately and cannot swing the vote.

Creditors can vote to approve the proposal as it stands, approve with modifications, or reject it. Modifications might include higher monthly payments, a longer term, or a requirement to include home equity.

6. IVA Takes Effect

If approved, the IVA is binding on all creditors who were entitled to vote — including those who voted against it and those who did not vote at all. This is one of the key advantages of an IVA over an informal arrangement.

The IP registers the IVA on the Individual Insolvency Register. Your IVA is now a matter of public record.

7. Make Monthly Payments

For the next 5-6 years, you make your agreed monthly payment to the IP. The IP deducts their fees and distributes the rest to creditors pro rata. You must stick to the payment schedule. If your income increases, the IVA may require you to increase your contributions. If your income decreases, you may be able to negotiate a variation.

8. Annual Review

Your IP will conduct annual reviews of your income and expenditure. If your circumstances have improved, your payments may increase. If they have deteriorated, you may be able to negotiate a temporary payment reduction — but only with creditor agreement.

9. Completion and Discharge

At the end of the IVA term, if you have made all required payments and complied with all terms, the IP issues a completion certificate. Any remaining unpaid balance on the debts included in the IVA is written off. Your creditors cannot pursue you for those debts.

Key Deadlines

What Happens After the IVA

If the IVA succeeds:

• All remaining balances on the debts included in the IVA are written off. Your creditors cannot pursue you further for those debts.
• The IP issues a completion certificate and notifies creditors.
• Your entry on the Individual Insolvency Register is removed three months after the IVA ends.
• Your credit file will show the IVA for six years from the date it started.
• You are free from the IVA restrictions — no more monthly payments, no more annual reviews.

If the IVA fails:

• An IVA can fail if you miss payments, breach the terms, or if your circumstances change so dramatically that the arrangement is no longer viable.
• If the IVA fails, the IP may apply to the court to have it terminated.
• Once terminated, your creditors are free to take any enforcement action available to them — including petitioning for your bankruptcy.
• Any payments you have already made under the IVA are not returned to you.
• You may be worse off than if you had gone straight to bankruptcy, because you will have spent years making payments that did not resolve your debts.

Debts NOT covered by an IVA:

• Secured debts (mortgage, secured loans) — unless specifically included in the proposal and agreed by the secured creditor.
• Student loans.
• Court fines.
• Child maintenance and child support arrears.
• Debts arising from fraud.
• Any debts specifically excluded from the proposal.

Common Mistakes

1. Choosing an IVA When It Is Not Appropriate

IVAs are heavily marketed by commercial debt management firms that earn fees from setting them up. Not everyone who is sold an IVA actually needs one. If your debts are under £30,000, a DRO may be cheaper and quicker. If you have no realistic prospect of maintaining payments for five years, bankruptcy might give you a faster fresh start. Always get independent advice before committing.

2. Underestimating the Duration

Five to six years is a long time to live on a strict budget. Many IVAs fail because people cannot sustain the reduced living standard for the full term. Be realistic about what you can afford before agreeing to a payment level.

3. Not Understanding the Home Equity Clause

Many IVA proposals include a clause requiring you to release equity from your home in the final year — either by remortgaging or by making additional payments equivalent to the equity. If you cannot remortgage (because of your credit history, which will be poor during the IVA), the IVA term may be extended by 12 months and you may have to make additional payments. Read this clause carefully before signing.

4. Ignoring Windfall Clauses

Most IVAs include a clause requiring you to pay any windfalls (inheritance, compensation, lottery winnings, PPI refunds) into the IVA. If you are expecting an inheritance, this could mean the entirety goes to your creditors rather than to you. Understand this before you agree.

5. Not Disclosing All Debts

Your IVA proposal must include all your unsecured debts. If you leave out a creditor, that creditor is not bound by the arrangement and can still pursue you independently. Worse, the omission could be treated as dishonesty and lead to your IVA being terminated.

6. Falling Behind on Payments Without Communicating

If you hit financial difficulty during your IVA, tell your IP immediately. They may be able to negotiate a temporary payment reduction with creditors. If you simply stop paying without explanation, the IP may have no choice but to terminate the arrangement.

7. Using a Non-Regulated Provider

Only a licensed insolvency practitioner can act as nominee and supervisor of an IVA. If you are dealing with a firm that is not regulated by a recognised professional body, you have no protection. Check the IP’s registration on the Insolvency Service website before proceeding.

8. Not Reading the Protocol Terms

Most consumer IVAs follow the IVA Protocol, a set of standard terms agreed between the insolvency industry and creditors. However, your specific proposal may include additional or different terms. Read everything before signing and ask your IP to explain anything you do not understand.

The Rules That Apply

IVAs are governed by the following legislation and rules:

• Insolvency Act 1986, Part VIII (sections 252-263G) — the primary statutory framework. Key sections include s.252 (interim order), s.253 (application for interim order), s.256 (nominee’s report), s.257 (meeting to consider proposal), s.260 (effect of approval), s.262 (challenge to decision), and s.263 (supervisor’s role).
• Insolvency (England and Wales) Rules 2016, Part 8 — detailed procedural rules for IVA proposals, meetings, voting, and supervision.
• The IVA Protocol — a voluntary code of practice for standard consumer IVAs, agreed between the insolvency profession and major creditors. Most high-street IVAs follow the Protocol, which standardises terms around payment levels, duration, home equity treatment, and windfall clauses.
• Statement of Insolvency Practice 3 (SIP 3) — ethical guidance for insolvency practitioners on handling IVAs, including transparency about fees and conflicts of interest.

The 75% approval threshold is set by s.257 and the 2016 Rules. Once approved, the IVA binds all creditors who had notice of the meeting, whether or not they voted and whether or not they voted in favour.

Related Court Forms & Guides

• Form N260: Statement of Costs — the costs schedule used at summary assessment.
• Form N244: Application Notice — the form for interim applications.
• Start a Money Claim Online (OCMC) — where most civil money claims begin.
• Particulars of Claim — setting out the basis of your claim.
• Civil Court Forms Index — every civil court form guide in one place.

How Chris Can Help

Setting up an IVA requires a licensed insolvency practitioner, and Chris cannot replace that role. However, Chris can help you with the preparation and with related legal issues that arise before, during, or after an IVA.

Chris can help with:

• Assessing your options — reviewing your financial position to help you decide whether an IVA, bankruptcy, DRO, or informal arrangement is most appropriate.
• Preparing your financial statement — organising your debts, assets, income, and expenditure into a clear format before you approach an insolvency practitioner.
• Understanding the proposal terms — reviewing the IVA proposal your IP has drafted, so you understand what you are agreeing to, including any home equity and windfall clauses.
• Dealing with creditors — if creditors are threatening court action while your IVA is being set up, Chris can help you draft correspondence to inform them of the pending arrangement.
• Responding to creditor modifications — if creditors vote to approve your IVA with modifications, Chris can help you understand the changes and decide whether to accept them.
• Challenging a failed IVA — if your IVA has been terminated and you believe the process was unfair or the IP acted improperly, Chris can help you understand your options for challenge.
• Preparing for bankruptcy — if your IVA fails and you face bankruptcy proceedings, Chris can help you prepare.

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Frequently asked questions

What is an IVA proposal?

It is the formal document, prepared with your insolvency practitioner, setting out how much you will pay each month, for how long, and what proportion of your debts this will repay. It includes a full statement of your affairs — all debts, assets, income and expenditure — the proposed monthly payment and duration (usually 60 months, sometimes 72), the estimated dividend, how the IP’s fees are paid, whether home equity is included, and any special terms such as windfall provisions.

How much do creditors need to approve an IVA?

Creditors representing at least 75% of the total value of your debts must vote in favour at the creditor meeting. Each creditor’s vote is weighted by the amount they are owed. Once approved, the IVA binds all creditors entitled to vote — including those who voted against it and those who did not vote at all.

How long does an IVA last?

Monthly payments typically last five to six years (60 to 72 months). At the end of the term, if you have made all required payments and complied with all terms, the IP issues a completion certificate and any remaining balance on the included debts is written off.

Which debts are not covered by an IVA?

Secured debts such as a mortgage (unless specifically included and agreed by the secured creditor), student loans, court fines, child maintenance and child support arrears, debts arising from fraud, and any debts specifically excluded from the proposal.

What is the home equity clause?

Many IVA proposals require you to release equity from your home in the final year — by remortgaging or making additional payments equivalent to the equity. If you cannot remortgage, the IVA term may be extended by a further period and additional payments may be required. Read this clause carefully before signing.

What happens if an IVA fails?

An IVA can fail if you miss payments or breach its terms. The IP may apply to the court to terminate it, after which creditors are free to take enforcement action, including petitioning for your bankruptcy. Payments already made are not returned, so it is important the proposed payment level is sustainable for the full term.

Related guides: Debt Relief Order guide · Bankruptcy application guide · All civil court forms