What an individual voluntary arrangement 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.
An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider.
How an IVA works
An IVA must be set up by a qualified person, called an insolvency practitioner. This will be a lawyer or an accountant. The insolvency practitioner will charge fees for the IVA. These can often be high and are based on the amount you pay back through the IVA. The insolvency practitioner deals with your creditors throughout the life of the IVA
If you go to a debt management company for an IVA, find out about how much they will charge before you decide. A debt management company is likely to be more expensive because they charge a fee on top of the insolvency practitioner's fees.
You don’t need to use 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 will 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 reasonably afford and the creditors will need to agree it. If you're making monthly payments the IVA will usually last for 5 or 6 years.
Any repayments will be paid directly to the insolvency practitioner. They will then distribute the money to your creditors. Some of this will be kept by the insolvency practitioner to pay their fees.
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. The insolvency practitioner should advise you about this.
If you owe money to people or companies in the EU
Any debts you owe people or companies in the EU might not be covered by an IVA.
Your creditors could keep asking you for money, for example by calling you and sending you letters.
If you live in the EU, they could take you to court in the EU.
EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020.
If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU.
Get legal advice if you have creditors in the EU. Find free or affordable legal help.
If you come into 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.
You can contact your nearest Citizens Advice for help if you get a lump sum after your IVA finishes.