What is an IVA?

An IVA, or Individual Voluntary Agreement, is a legally binding agreement between an individual and their creditors, and is a way of effectively consolidating payments to creditors into one, manageable and affordable monthly amount. They were introduced after the government passed the Insolvency Act in 1986, and are designed to provide an alternative option to those that may find themselves in financial difficulties and do not want to go through the stress and potential stigma that can be associated with Bankruptcy.

Criteria and repayments

Where an individual has more than £12,000 of unsecured debt and is employed, then a licensed Insolvency Practitioner (IP) may be able to help by initially consulting with the individual to establish monthly income and outgoings, then calculating an affordable plan to pay back outstanding debt, usually over a 3 - 5 year period. The IP will then consult with all creditors involved to arrange the implementation of the IVA. Provided creditors of 75% of the debt are in agreement the IVA will usually be accepted.


It is important to remember that an IVA is not just an easy way to wipe out debt without going bankrupt. While it is true that if creditors agree they will often accept a lower amount repaid than the value of the original debt, if a debtor has any reasonable assets or savings, they may still be required to use this to pay back some of the outstanding debt. While an individual in an IVA will not be expected to sell their house, should the value of the home be worth more than the mortgage, if possible, some equity may need to be released, again to help pay back some of the debt. Furthermore, there is often a windfall clause built in to the terms of an IVA, so should an individual come into some unexpected money, such as winning the lottery, then that money will have to be used towards paying back the creditors. This can of course have the advantage of ending the IVA early.


With the help of a reputable, licensed Insolvency Practitioner, becoming debt free need not be a stressful experience and once an IVA is in place, provided the monthly payments are kept; there is a clear timeline and date which an individual can work towards to become debt free.