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Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay part of your unsecured debt, usually over 5 to 6 years, through a single monthly payment arranged by a licensed insolvency practitioner. It’s a type of personal insolvency, sitting alongside bankruptcy as one of the formal routes for dealing with debt you can’t otherwise repay, but it’s designed to let you keep more control over your assets than bankruptcy usually allows.
How does an IVA work?
A licensed insolvency practitioner assesses your income, outgoings and total debt, and proposes a monthly payment you can realistically afford over the life of the arrangement. That proposal is put to your creditors at a creditors’ meeting, and if creditors representing at least 75% of the total debt by value vote in favour, the IVA is approved and becomes legally binding on every included creditor, even those who voted against it.
Once approved:
- You make one affordable payment each month to the insolvency practitioner, who distributes it to your creditors.
- Creditors included in the IVA generally can’t take further action to recover the debt, such as calling, writing demanding letters, or pursuing court action, while you keep to the terms.
- Interest and charges are usually frozen for the life of the arrangement.
- At the end of the agreed period, usually 5 to 6 years, any remaining unpaid balance on the included debts is written off.
How is an IVA different from a debt management plan?
Both an IVA and a debt management plan (DMP) involve one reduced monthly payment shared between unsecured creditors, but an IVA is formal and legally binding once approved, while a DMP is informal and any creditor can decline or leave it at any point. Our guide on DMP or IVA: what’s the difference sets out a full comparison, including how each is recorded on your credit file.
| IVA | DMP | |
|---|---|---|
| Legal status | Formal insolvency procedure | Informal arrangement |
| Arranged by | Licensed insolvency practitioner | Debt charity or commercial provider |
| Creditor agreement needed | 75% of debt by value | Each creditor decides individually |
| Protection from creditor action | Yes, once approved | No |
| Typical length | 5 to 6 years | No fixed term |
| Outcome at the end | Remaining debt written off | Continues until fully repaid |
| Recorded on your credit file | Yes, 6 years from the start date | Not the plan itself, but individual account markers |
How long does an IVA last, and how is it recorded?
Most IVAs run for around 5 to 6 years, though the exact term depends on your proposal. It’s recorded on your credit file for 6 years from the start date, even if you complete it sooner, and it also appears on the Insolvency Register while it’s active and for 3 months after it ends. Our guide on how long an IVA lasts covers what can shorten or extend that period.
What happens if you can’t keep up with the payments?
If your circumstances change, contact your insolvency practitioner as soon as possible, since IVA payments can sometimes be varied to reflect a genuine change in income. If an IVA fails altogether, meaning payments stop and can’t be resumed on revised terms, creditors can usually resume normal recovery action on the debt, and in some cases the arrangement can lead to bankruptcy instead. This is a serious step, and getting advice early, rather than letting an IVA lapse quietly, tends to give you more options.
What happens to your home in an IVA?
Your home isn’t automatically at risk simply because you have an IVA, since an IVA usually deals with unsecured debt rather than your mortgage. However, many IVAs include a clause requiring you to try to release equity from your home, commonly towards the end of the arrangement, often in the final 6 months, if you have enough equity to do so. Some IVAs are extended, often by up to 12 months, if a remortgage to release that equity isn’t possible at the time. Always check your own IVA terms, or ask your supervisor, rather than assuming what applies generally. Our guide on what happens to your home in an IVA explains this clause in more detail.
What it means for a homeowner who wants to remortgage
Remortgaging while an IVA is active usually needs your supervisor’s agreement, since it connects directly to the equity release clause many arrangements include. Lenders considering an application during an active IVA will also want to understand your current financial position in full. Our pages on remortgaging after an IVA and remortgaging during an IVA cover what’s typically involved at each stage, and remortgaging after a completed IVA explains what changes once the arrangement has finished.
If a remortgage is being considered specifically to raise money towards the IVA, or to consolidate debt more broadly, it’s worth understanding that this turns unsecured debt into debt secured against your home. Our page on debt consolidation remortgages explains that risk, and it’s a decision worth making with advice from your supervisor and, where appropriate, a mortgage adviser, rather than in isolation.
Getting advice before starting an IVA
An IVA is a significant, formal step, and it isn’t the right answer for everyone with unsecured debt. Free, impartial debt advice from MoneyHelper, StepChange or National Debtline can help you understand whether an IVA, a DMP, or another route fits your circumstances best, before you commit to an arrangement that will affect your credit file and finances for several years.
Frequently asked questions
Is an IVA the same as bankruptcy?
No. An IVA is a formal agreement to repay part of your debt over a set period, arranged with your creditors' agreement, whereas bankruptcy is a different insolvency procedure where your assets can be used to repay creditors and you're usually discharged within 12 months. Our guide on what happens to your home in bankruptcy explains that separate process.
Do all my creditors have to agree to an IVA?
Not every single one. An IVA is approved if creditors representing at least 75% of the debt by value vote in favour at the creditors' meeting. Once approved, it legally binds every creditor included, including those who voted against it or didn't vote at all.
Will an IVA affect my mortgage?
It doesn't directly touch your mortgage payments, since an IVA usually covers unsecured debt only, but many IVAs include a clause about trying to release equity from your home later in the arrangement. Check your own IVA terms or ask your supervisor, and see our guide on what happens to your home in an IVA.
Can I get a mortgage during an IVA?
It's difficult, and remortgaging during an IVA usually needs your supervisor's agreement, since it directly relates to the equity release clause many IVAs include. Our page on remortgaging during an IVA explains what's typically involved and what an adviser will ask about.