Key facts: An IVA is a legally binding agreement to pay what you can afford for usually 5–6 years, after which remaining included debts are written off. It needs approval from creditors holding 75% of voting debt, is run by a licensed insolvency practitioner, sits on your credit file for six years, and appears on the public Insolvency Register. Homeowners may have to release equity near the end.
How an IVA works
A licensed insolvency practitioner assesses your income, essential outgoings and debts, proposes an affordable monthly payment, and puts it to your creditors. If 75% by debt value approve, the IVA binds all included creditors — interest freezes, enforcement stops, contact ceases. You pay the agreed amount (reviewed annually) for the term; whatever remains at the end is legally written off. Windfalls and pay rises are partly captured along the way — it's a supervised arrangement, not a private plan.
The costs and consequences
IVA fees are substantial but come out of your monthly payments rather than on top — creditors effectively fund them from what they receive. The heavier prices are consequential: six years of serious credit-file damage (mortgages and mainstream credit largely gated until it clears — see post-IVA mortgage routes), the public register, restrictions on further borrowing during the term, and — for homeowners — a common clause requiring an attempt to remortgage and release equity in the final year, or extra payments in lieu. Failing the IVA (missed payments without renegotiation) can lead to its collapse and, in the worst case, a bankruptcy petition with your earlier payments largely spent on fees.
Who an IVA fits — and who it doesn't
The natural fit: unsecured debts too large to clear in a few years (as a guide, £10,000+ across multiple creditors), a steady income that can sustain a meaningful monthly payment, and — often decisively — assets to protect, since an IVA typically shields a home in a way bankruptcy may not. The wrong fit: debts a DMP could clear affordably (why take six years of formal insolvency for restructurable debt?), very low incomes with no assets (a Debt Relief Order is faster and cheaper where eligible), or genuinely unpayable situations where bankruptcy's shorter timeline is honestly kinder — the comparison our large-debts guide walks through.
Get free advice before signing anything
IVAs are heavily marketed because they generate fees — which is exactly why the decision should start with free, impartial advice: StepChange, Citizens Advice or National Debtline will compare every solution against your actual numbers with no stake in the outcome. If an IVA is right, they can refer you to reputable practitioners. Be wary of ads promising "government schemes to write off 90% of debt" — that's lead-generation copy, not advice.
If your debts are restructurable instead
Where affordability is strained but intact, consolidation may beat formal insolvency — find a debt specialist through Nesto — free, confidential, no obligation.
Frequently asked questions
How much debt is written off in an IVA?
Whatever remains after your affordable payments across the term — the percentage varies entirely with your circumstances, not a advertised figure.
Will an IVA stop creditor action?
Yes — once approved it legally binds included creditors: interest frozen, enforcement halted, contact through the practitioner.
Can I keep my home in an IVA?
Usually yes — that protection is a key reason homeowners choose IVAs — but expect an equity-release review near the end of the term.
How long does an IVA affect my credit?
Six years from its start date. Mortgages become realistic again via specialist lenders after completion, improving as it ages.