If you successfully complete the IVA and meet its terms, qualifying unsecured debt covered by the arrangement can be written off.
An IVA isn't suitable for everyone, however, so it's important to understand how it works and what the risks are before deciding whether it is right for you.
On this page
- How does an IVA work?
- How long does an IVA last?
- How much do you pay into an IVA?
- What happens to the money I pay?
- Which debts can be included in an IVA?
- What happens to my creditors once an IVA is approved?
- Can creditors still contact me after an IVA starts?
- What happens if my circumstances change?
- What happens if I can't afford my IVA payments?
- What happens if I miss IVA payments?
- What happens if my IVA fails?
- What happens to my home during an IVA?
- Can I settle an IVA early?
- What are the advantages of an IVA?
- What are the disadvantages of an IVA?
- How does an IVA affect your credit rating?
- What happens when an IVA is completed?
- Is an IVA right for me?
- How an IVA works: frequently asked questions
How does an IVA work?
An IVA is arranged and supervised by a licensed Insolvency Practitioner (IP).
Your IP will look at your financial circumstances, including:
- Your income
- You want to make a structured contribution towards your debts.
- Your household expenditure
- Your debts
- Your property and any equity
- Your ability to make affordable monthly payments
They will then help you prepare a proposal for your creditors.
If the required level of creditor approval is obtained, the IVA becomes legally binding on the creditors covered by the arrangement. Under the current IVA Protocol, creditors representing at least 75% of the debt voting must approve the proposal.
You then make the agreed payments to your Insolvency Practitioner, who distributes the money to your creditors after the applicable costs and fees.
How long does an IVA last?
A Protocol IVA will normally last 60 months.
However, under the 2025 IVA Protocol, the proposed term is normally 72 months if you have a beneficial interest in your family home worth £10,000 or more.
The exact length of an individual IVA can depend on its terms and your circumstances.
An IVA can also be extended in certain circumstances, for example where payments have been missed or other obligations have not been met. The 2025 standard terms allow certain extensions of up to 12 months without a formal variation.
How much do you pay into an IVA?
Your monthly payment is generally based on what you can reasonably afford after your essential household expenditure has been taken into account.
Your IP will prepare an income and expenditure assessment to work out your disposable income.
The aim is to establish a payment that is sustainable for you while providing a reasonable return to your creditors.
Your circumstances are reviewed during the IVA. Under the 2025 Protocol, the annual review is used to confirm that your payments remain affordable and appropriate. If your disposable income increases, your regular payment will generally increase by 50% of the increase in disposable income following the review.
Your payment isn't necessarily fixed for the entire IVA.
What happens to the money I pay?
The money you pay into your IVA is used to make distributions to the creditors included in the arrangement, after the relevant costs of administering the IVA.
Your Insolvency Practitioner supervises the arrangement and makes the payments to creditors.
The creditors don't simply receive your monthly payment directly.
Which debts can be included in an IVA?
An IVA can deal with many types of unsecured debt.
These can include debts such as:
- Credit cards
- Personal loans
- Overdrafts
- Store cards
- Certain unsecured finance agreements
- Other qualifying unsecured debts
However, not every type of debt can be dealt with in the same way.
Some debts are excluded from an IVA or have special rules attached to them.
You should therefore have all of your debts properly assessed before entering an arrangement.
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If you’re considering using a lump sum to clear your debts, call our FREE Helpline on 0800 3688 286 (freephone, including all mobiles) for a confidential conversation.
What happens to my creditors once an IVA is approved?
Once the IVA has been approved, creditors covered by the arrangement are generally prevented from taking further action to recover the debts included in it.
The 2025 standard terms state that, once the arrangement begins, creditors cannot take action against your property or person or start or continue legal proceedings in respect of debts covered by the arrangement, subject to certain exceptions.
This is one of the major differences between an IVA and simply trying to negotiate with creditors yourself.
Can creditors still contact me after an IVA starts?
Creditors included in the IVA should deal with the arrangement through the Insolvency Practitioner rather than continuing normal collection activity for the debts covered by the IVA.
If you receive correspondence from a creditor about a debt included in your IVA, give it to your IP so they can advise you.
What happens if my circumstances change?
You must tell your Insolvency Practitioner if your circumstances change.
This can include:
- Losing your job
- A significant reduction in income
- A significant increase in income
- Receiving a bonus
- Receiving an inheritance
- Receiving another significant payment
- Changes to your household circumstances
- Changes to your expenditure
The 2025 standard terms require you to inform the Supervisor about relevant changes in income and after-acquired assets. They also require you to provide information needed for the annual income and expenditure review.
Don't assume you can keep an unexpected payment simply because you didn't know it might be relevant to your IVA.
Speak to your IP before spending it.
What happens if I can't afford my IVA payments?
If your circumstances change and you can no longer afford your agreed payment, contact your Insolvency Practitioner as soon as possible.
Don't simply stop paying.
Depending on the circumstances, your IP may be able to agree a payment holiday or reduction in your regular payment.
Under the 2025 Protocol, payment holidays can total up to the equivalent of nine months' payments over the arrangement, subject to the applicable conditions. The arrangement can normally be extended by up to 12 months to recover the missed payments.
The Supervisor can also reduce regular contributions by up to 20% without referring the change back to creditors. A larger reduction normally requires a formal variation.
For more information, see our guide:
What happens if I miss IVA payments?
Missing payments doesn't automatically mean that your IVA will immediately fail.
However, you should tell your IP why you've missed them and discuss how the problem can be resolved.
Under the 2025 standard terms, you can be in breach of the arrangement if you are in arrears equivalent to three or more months of agreed payments, unless a payment holiday or reduced payments have been agreed.
If your IP believes you are in breach, they can issue a Notice of Breach and give you an opportunity to remedy the problem or propose how it can be resolved.
If the breach isn't remedied, the IVA can ultimately be terminated.
What happens if my IVA fails?
If your IVA is terminated, the protection provided by the arrangement comes to an end.
Creditors may then be able to pursue outstanding debts directly, and interest and charges may become relevant again.
This is why it's important to speak to your IP as soon as you start experiencing problems.
A failed IVA doesn't necessarily mean that you have no options, but you should get advice before deciding what to do next.
What happens to my home during an IVA?
This is an area where older IVA information can be misleading.
Under the 2025 IVA Protocol, the family home is excluded from the Protocol IVA. Instead, the amount of beneficial interest you have in the property affects the length of the arrangement.
For the purpose of the Protocol, equity is calculated using 85% of the property's value less secured borrowing, such as a mortgage.
If your beneficial interest is less than £10,000, the arrangement will normally last 60 months.
If your beneficial interest is £10,000 or more, it will normally last 72 months.
There can be exceptions and more complicated situations, so homeowners should make sure they understand exactly how their own property will be treated before entering an IVA.
We've got a separate guide covering this in detail:
Can I settle an IVA early?
Potentially.
If you have access to a lump sum, you may be able to propose a full and final settlement or another variation of your IVA.
Whether this is possible and how much would need to be offered depends on your circumstances and the terms of your arrangement.
We've got a separate guide covering this in detail:
What are the advantages of an IVA?
An IVA can have several potential advantages.
It is legally binding
Once approved, the IVA is legally binding on the creditors covered by it.
You make one agreed payment
Rather than dealing separately with multiple unsecured creditors, you normally make your agreed payment to the Insolvency Practitioner.
It has a defined structure
An IVA normally lasts for a specified period, subject to its terms and any permitted extensions.
Qualifying debt can be written off
If you successfully complete the IVA, qualifying unsecured debt covered by the arrangement can be released in accordance with its terms.
It can provide protection from creditor action
Creditors covered by the IVA are generally prevented from taking further recovery action in relation to the debts included in the arrangement.
What are the disadvantages of an IVA?
An IVA is a serious financial commitment and there are risks.
It affects your credit history
An IVA will have a significant impact on your ability to obtain credit.
You have to stick to the terms
You must provide information, cooperate with your IP and make the agreed payments.
Your circumstances can affect the payments
Your payment may change if your disposable income changes.
There are costs
An IVA involves professional fees and costs. These should be explained to you before you agree to the arrangement.
The IVA can fail
If you don't comply with the terms, the arrangement can potentially be terminated.
It isn't suitable for everyone
The Insolvency Service specifically states that an IVA may not be appropriate where, for example, debts are low, the affordable monthly payment is very small or income is mainly from benefits. Other debt solutions may be more suitable.
How does an IVA affect your credit rating?
An IVA has a serious impact on your credit history.
It will normally remain on your credit file for six years from the date the IVA was approved.
Completing the IVA early doesn't normally remove the record from your credit file immediately.
During the IVA, there are also restrictions on obtaining additional credit. Under the 2025 standard terms, you generally need the Supervisor's prior written approval to obtain credit of more than £500, subject to specified exceptions.
Having an IVA doesn't mean you are permanently unable to obtain credit. However, rebuilding your credit history after an IVA can take time.
What happens when an IVA is completed?
Once you have complied with the terms of your IVA, your Insolvency Practitioner will issue a completion certificate.
Under the 2025 standard terms, this should be issued within 28 days of the later of the final payment becoming due or you completing the other requirements of the arrangement. Once the completion certificate has been issued, you are released from the debts subject to the arrangement
Keep your completion certificate safely.
Is an IVA right for me?
An IVA can be a useful solution for some people, but it isn't automatically the best option.
Before deciding, you should consider:
- How much you owe
- Your income
- Your essential expenditure
- Whether you own a home
- Your other assets
- The types of debts you have
- Whether your income is stable
- How much you can realistically afford each month
- Whether another debt solution might be more appropriate
Get Expert Debt Support Today
If you’re considering using a lump sum to clear your debts, call our FREE Helpline on 0800 3688 286 (freephone, including all mobiles) for a confidential conversation.
The 2025 Protocol itself recognises that a Protocol IVA isn't suitable for everyone and that alternatives can include a bespoke IVA, Debt Relief Order, bankruptcy or another debt solution.
How an IVA works: frequently asked questions
Get Expert Debt Support Today
If you’re considering using a lump sum to clear your debts, call our FREE Helpline on 0800 3688 286 (freephone, including all mobiles) for a confidential conversation.
Sources and Further Information
GOV.UK – Key Facts: Protocol Individual Voluntary Arrangements
Insolvency Service – What you need to know about IVAs
MoneyHelper – What is an Individual Voluntary Arrangement?
