What Is an IVA?

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An IVA (Individual Voluntary Arrangement) is a formal agreement that helps you repay your debts in a manageable way by making fixed monthly payments, usually over five or six years.

It’s a legally binding arrangement between you and your creditors designed to help you avoid bankruptcy while still paying back as much as you can reasonably afford.

An IVA is set up and managed by an insolvency practitioner who reviews your finances and proposes a repayment plan based on what you can realistically pay. During the IVA, interest on your debts is frozen, and creditors cannot chase you or take legal action as long as you keep up with the agreed payments. Citizens Advice also offers guidance on the benefits and limitations of entering an IVA.

Key Points

• An IVA is a legally binding agreement between you and your creditors to pay off your debts over a fixed period, usually around 5-6 years.
• An IVA is set up and managed by a licensed insolvency practitioner who handles payments and communication with creditors.
• It assumes that you will be paying much smaller amounts, but it will be marked on your credit score that you have an IVA and this will likely impact your chances of being approved for future credit
• Being in an IVA offers protect from creditor action, because interest and charges will be frozen once the IVA is approved
• This will be on your credit file for 6 years

What Is The Definition Of An IVA?

An IVA is a structured debt solution that allows you to combine multiple unsecured debts into one affordable repayment plan. It’s approved by the court and managed by a licensed insolvency practitioner. Once your creditors agree to the proposal, the IVA becomes legally binding on all of them, even those who voted against it.

An IVA typically lasts five or six years, depending on your circumstances. Any unsecured debt included in the IVA that remains unpaid at the end is written off, giving you a fresh start. 

Because it’s a formal insolvency procedure, it comes with strict rules and obligations, so it’s usually recommended for people with significant debts who cannot afford normal repayments.

Does Having An IVA Make It More Difficult To Borrow Money Or Get A Loan?

Yes, having an IVA makes it more difficult to borrow money because lenders see it as a clear sign that you’ve struggled to manage debt in the past. Most mainstream lenders will automatically decline applications from anyone currently in an IVA, and many will continue to do so until some time after the IVA has finished.

Even if a lender is prepared to consider you, you’re likely to face higher interest rates, lower borrowing limits, and fewer options overall. Your credit score will also be significantly affected, which makes passing standard affordability and credit checks more challenging.

In short, borrowing during or shortly after an IVA is possible in rare cases, but it’s neither easy nor advisable unless absolutely necessary.

Do I Need An IVA?

You only need an IVA if your debts are unmanageable and you can’t afford to repay them through normal monthly payments. An IVA is a formal insolvency solution, meaning it’s designed for people with significant debt who still have a steady income and want to avoid bankruptcy. It’s not a quick fix, and it won’t suit everyone. However, for some, it offers a structured way to get back in control of your debt.

An IVA may be worth considering if you owe money to multiple creditors, interest is piling up faster than you can pay it off, and you’re consistently struggling to meet minimum repayments. It can help reduce pressure from creditors and stop further interest, but it also comes with serious long-term implications for your credit score and financial options.

Before choosing an IVA, it’s important to explore alternatives such as debt management plans, payment holidays, or informal agreements with creditors. Speaking to a free debt advice charity can help you understand whether an IVA is truly the best option for your situation.

How Do You Get Rid Of An IVA?

You can only get rid of an IVA by completing it or by having the terms successfully changed through a formal variation. Once you finish all required payments, your insolvency practitioner will issue a completion certificate, which confirms that you’ve met your obligations and that the IVA has ended.

If your circumstances change (for example, your income drops or you become unemployed) your insolvency practitioner may be able to ask creditors to agree to new terms. This could mean reduced payments or a longer duration.

However, if the IVA fails (usually because payments stop), creditors can resume action against you, including legal steps, and you may be pushed toward bankruptcy.

The cleanest way to complete an IVA is to make all the agreed payments until the end of the arrangement. This could be a slow process to pay off your debts or using a debt consolidation loan to clear them all at once.

How Long Does An IVA Stay On Your Credit File?

An IVA stays on your credit file for six years from the date it was approved, regardless of whether you finish paying it earlier. This means lenders will see it on your report for the full six years, which can significantly limit your ability to borrow.

Once the six years have passed, the IVA will automatically drop off your credit file. This doesn’t instantly repair your credit score, but it does give you the chance to start rebuilding your financial profile, especially if you’ve kept up with payments throughout the IVA.

What is The Difference Between an IVA and CCJ?

The main difference between a CCJ and IVA is that an IVA is voluntary and designed to help you manage debts collectively, while a CCJ is imposed by the court and focuses on a specific unpaid debt.

Both are assigned to people with ongoing or outstanding debts and this mark will appear on your credit file for six years and can affect your ability to obtain your ability to secure future credit. An IVA offers wider protection from creditors, whereas a CCJ can be the start of further legal enforcement if the debt remains unpaid. See CCJ loans.

What Should I Do If I Need To Borrow Money But Have An IVA?

If you need to borrow money while you’re in an IVA, the first thing you must do is speak to your insolvency practitioner. You’ll need written permission to take out any credit over £500, and in most cases, they will only give approval if the borrowing is essential.

Because your options are extremely limited, it’s worth looking at alternatives before applying for any new credit. This could mean adjusting your budget, speaking to your IVA supervisor about temporary difficulties, or seeing whether you qualify for financial support schemes. Taking on new borrowing without permission can cause your IVA to fail, which may lead to more serious consequences.

Borrowing during an IVA should only happen as a last resort and only with explicit approval

An IVA is a structured way to deal with debt when repayments have become unmanageable, but it comes with serious commitments and long-term credit implications.

It limits your borrowing options, stays on your credit file for six years, and must be completed in full to be cleared. If you’re considering an IVA or already have one, the most important thing is to stay in contact with your insolvency practitioner and seek advice before making any financial decisions that might affect the arrangement.