Check what an IVA is
An individual voluntary arrangement (IVA) is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. This means it’s approved by the court and your creditors have to stick to it.
While you have an IVA your creditors should stop:
- charging interest on your debts
- chasing you to pay your debts
While you’re in an IVA you must:
- make the agreed payments - this is usually a single monthly payment or a lump sum
- let your IVA provider know if your income increases or you get any other money
- not take out any new credit without permission, for example loans
You can include any amount of debt in your IVA. There are no minimum or maximum limits. The fees for an IVA are high so if your total debt is less than £10,000 an IVA might not be the best option.
If you don’t have a lump sum of money or regular amounts to pay into an IVA, you should check other options for getting out of debt. You can find out more about other debt solutions.
An IVA must be set up by a qualified person, called an insolvency practitioner. The insolvency practitioner will charge fees for the IVA.
Think carefully before using a debt management company
Debt management companies are organisations that offer to help you deal with your debts. You might see their adverts online or they might try to contact you directly.
You can get an IVA without a debt management company. It’s usually cheaper and you can find an insolvency practitioner yourself - they’ll guide you through the process.
A debt management company is likely to be more expensive because they charge a fee on top of the insolvency practitioner's fees.
If you're thinking about using a debt management company, check how much they'll charge before you decide.
To start an IVA without a debt management company - you can find an insolvency practitioner yourself on GOV.UK.
How the repayments work
If you decide to get an IVA, you'll work out a repayment plan with the insolvency practitioner. This could be monthly payments, a lump sum or a combination of both.
The repayment plan should be based on an amount you can afford and your creditors will need to agree it. If you're making monthly payments the IVA will usually last for 5 or 6 years.
You’ll make your payments to the insolvency practitioner. They’ll keep some of this to pay their fees and split the rest between your creditors.
The insolvency practitioner will review your situation each year while you’re on an IVA. If your income changes, your IVA payments might change. For example, if you get a pay rise at work you’ll be expected to pay more into your IVA.
If the payments you make aren’t enough to pay your debts in full by the end of your IVA, you won’t have to pay the rest.
If you get a lump sum of money
If you receive a windfall during your IVA, for example an inheritance, this will usually be taken and paid to your creditors. If you find out that you're due some money because of something that happened before the IVA, your creditors might have the right to claim it too - even if your IVA has finished.
Talk to an adviser if you get a lump sum after your IVA finishes.
Check which debts you can include in an IVA
When you get an IVA you can include:
- gas and electricity arrears
- Council Tax arrears
- water arrears
- payday loans
- store cards
- personal loans
- credit cards
- income tax and national insurance arrears
- tax credit or benefit overpayments
- debts to family and friends
- other outstanding bills, for example solicitor's costs, invoices for building work and vets bills
Any number of debts can be included but normally an IVA will be suitable if you have more than one creditor.
If you owe money to people or companies in the EU
You can’t usually add debts you owe to people or companies in the EU.
Your creditors will still be able to keep asking you for money, for example by calling you and sending you letters.
Get legal advice if you have creditors in the EU. Find free or affordable legal help.
If you owe money to HM Revenue and Customs
If most of your debts are for things like income tax, national insurance arrears or overpaid tax credits, an IVA might not be the right option for you. In this situation HM Revenue & Customs (HMRC) won’t usually agree to the IVA. If HMRC debts are only a small part of what you owe, you should still be able to include them in an IVA.
If you owe money for your rent, mortgage or secured loans
You can't usually include secured loans, mortgages or rent in an IVA.
Secured loans are debts which are secured against your home. This means if you can’t pay the debt, they can take your home.
You can only include a secured loan or mortgage in an IVA your lender agrees - they don’t usually agree.
If you owe rent, an IVA will not stop your landlord taking action to evict you.
It’s best to pay mortgage or rent arrears separately to your IVA - this will stop you losing your home.
Check which debts you can’t include in an IVA
Debts you can’t include in an IVA are:
- maintenance arrears that have been ordered by a court
- child support arrears
- student loans
- magistrates' court fines
- Social Fund loans
- TV licence arrears
If you have debts that can’t be included in the IVA, you'll have to deal with those separately so you need to make sure you have enough money to pay these debts before paying money into an IVA.
You can find out about other debt solutions.
How to deal with joint debts
You might have some ‘joint debts’ which are owed by you and another person, such as a partner.
An IVA can only cover one person, so the other person will still be responsible for the whole of the debt. It might not be a good idea to include joint debts in the IVA.
You can't take out a joint IVA, but you and the other person might be able to take out individual IVAs that are connected - these are called ‘interlocking’ IVAs. Your insolvency practitioner will be able to advise you about this.
If you have a lot of joint debts and the other person doesn't want an IVA, you might need to take a different option.
Get breathing space if you need more time to decide what to do
If you're not ready to use a debt solution or you can't afford to right now, the government-backed Breathing Space scheme could give you extra time.
If you’re eligible, you could get 60 days of breathing space where your creditors can’t:
- contact you
- take action to make you pay
- add interest and charges to your debt
It covers most debts, including credit and store cards, loans, overdrafts and arrears on household bills. You'll need to get advice from a debt adviser first - they’ll check all your debts to see if they’re covered.
To see if breathing space is right for you, talk to an adviser.
If you’re getting mental health crisis treatment
You might be able to get breathing space from your creditors for the whole time you're getting crisis treatment, plus 30 days after. Crisis treatment includes things like getting emergency or acute mental health care in hospital or the community.
Speak to your mental healthcare provider about ‘Mental Health Crisis Breathing Space’.
Check if an IVA is right for you
An IVA is an expensive option and a long term commitment - there might be a better solution for your situation.
Check if an IVA is right for you before applying.