How an IVA Can Help You Take Control of Debt in the UK

If you feel like you’re drowning in debt, you are not alone. Many people across the UK turn to payday loans, credit cards, and overdrafts just to make ends meet. But when those bills pile up and you can’t see a way out, it’s time to take a closer look at your options.

One solution you might not know about is the Individual Voluntary Arrangement, or IVA. An IVA is not a loan. It’s not bankruptcy either. It’s a legal plan to help you pay back what you can afford and clear the rest. If you’re ready to take your first step toward a debt-free future, keep reading.

What Is an IVA and How Does It Work?

Let’s start at the beginning. If you have debts you can’t pay off within a few years, an IVA is a formal way to deal with them. It’s approved by the court and your creditors, and backed by the law. Here’s how it works in plain English:

• An IVA is a legally binding payment plan for unsecured debts. These are things like credit cards, payday loans, store cards, and some utility arrears.
• You make a single monthly payment you can afford.
• You do this for a set period, usually five years.
• At the end, any remaining debt in the plan is written off. Yes, written off.
• Your creditors must stick to the agreement. They can’t chase you for more money while you’re paying through the IVA.

The person who helps you set this up is called an insolvency practitioner (IP). Think of them as your debt guide. They work with you to create a plan you can stick to, then they talk to your creditors for you.

Key facts about IVAs:

• Only for unsecured debts, not things like mortgages or car finance.
• You keep control of your home and most of your belongings, unless you agree to something different.
• Once the IVA is in place, creditors have to stop taking legal action for those debts.
• You pay through your IP, not your creditors.

Who Can Use an IVA, and Which Debts Are Included?

IVAs aren’t for everyone. There are rules to qualify.

• You can usually get an IVA if:

• You owe at least £6,000 in unsecured debts. Some providers might set the minimum higher.
• You have at least two different creditors.
• You have enough money left after essentials each month to make a payment.

Debts you can include in an IVA:

• Credit cards
• Payday loans
• Personal loans
• Overdrafts
• Store and catalogue cards
• Some utility or council tax arrears

Debts you cannot include:

• Secured debts (like mortgages or car finance)
• Student loans
• Child maintenance
• Court fines or penalties from fraud
• Social Fund loans

If you have debts that can’t go in the IVA, you’ll still have to pay those separately. Your IP will show you how to manage both types.

TIP: I always suggest you make a clear list of every debt you owe before speaking to an advisor. This way, you can see which ones might go into your IVA and which ones you’ll still need to pay on your own.

How Do You Set Up an IVA? Step-by-Step Guidance

Setting up an IVA isn’t something you do alone. Here’s what the process looks like, step by step:

1. Get professional debt advice
   You need to speak with a regulated debt adviser first. They’ll look at your situation and see if an IVA is right, or if another solution is better.
2. Choose an insolvency practitioner (IP)
   If an IVA makes sense, you’ll pick an IP. They’ll look at all your finances: your income, what you owe, your regular expenses, and any assets.
3. Draft your IVA proposal
   Your IP puts together a plan showing what you can afford to pay each month, based on your disposable income.
4. Creditors decide
   Your IP sends the plan to your creditors. They have 28 days to say yes or no. If creditors who own at least 75% of your debt (by value of those who vote) agree, the IVA goes ahead. Then all included creditors must stick to it.
5. Make monthly payments
   You pay your IP each month, often by standing order. Your IP takes their fees out, then splits the rest between your creditors.

Remember: No upfront fees. Your IP’s fees are included in your monthly payments.

How Is Your IVA Payment Worked Out?

The payment you make isn’t random. It’s based on your disposable income. That’s what’s left each month after you cover things like:

• Rent or mortgage
• Utilities (gas, electricity, water)
• Food
• Travel
• Council tax
• Childcare

The more you have left over, the higher your payment is likely to be. But it always needs to be affordable for you.

If your income drops, or your expenses go up, tell your IP straight away. They can adjust your plan or extend the time if needed. The point is to help you succeed, not set you up to fail.

Minimum payment amounts can vary between providers. Always ask.

What Does an IVA Cost? Understanding the Fees

One worry people have is fees. With an IVA, you don’t pay anything upfront. Here’s how it usually works:

• Your IP’s proposal, management, and completion fees are taken from your monthly payments.
• Typically, the fees are around 15% of what you pay in, plus set charges for setting up and closing the IVA.
• It’s your right to ask your IP for a clear breakdown of these fees, so you know exactly what’s being taken and why.

TIP: I recommend you always request a written breakdown of all fees before you sign up. This can help you avoid any surprises and makes it easier to budget each month.

Legal Protections: How an IVA Shields You

Once your IVA is approved, you get real legal protection. That means:

• Creditors must stop chasing you for payment. No more letters, calls, or new County Court Judgments (CCJs).
• Bailiffs can’t visit for included debts.
• No more interest or extra charges can be added from day one.
• The protection lasts as long as you stick to your IVA.

But remember, you can’t take out more than £500 of new credit without asking your IP first. The aim is to keep your finances stable while you rebuild.

How Long Does an IVA Last, and What Happens at the End?

Most IVAs run for five years. If you own a home and need to release equity, it can be six years. At the end:

• Any debt in the IVA you haven’t paid is written off.
• You get a completion certificate as proof.
• Your IVA is listed on the public Insolvency Register and your credit file for six years from the start date, then it comes off.

What If You Miss Payments or Your IVA Fails?

Life happens. If you miss a payment:

• Tell your IP right away. They want you to succeed. They can help you get back on track or adjust the plan if things have changed.
• If you miss several payments and can’t agree on a solution, the IVA can fail.
• If it fails, creditors can chase you again. They might push for bankruptcy.
• An IVA affects your credit score for at least six years. But finishing an IVA often looks better to future lenders than going bankrupt.

Risks and Drawbacks: Is an IVA Right for You?

No debt solution is perfect. IVAs have some real drawbacks:

• Your credit rating will be seriously affected for at least six years.
• If you can’t stick to the plan, you might face bankruptcy anyway.
• Some jobs, especially in finance, could be affected by having an IVA.
• If you own your home, you might be asked to release equity or, in rare cases, sell assets.
• If you’re likely to get a windfall (like an inheritance), you’ll have to tell your IP. Some or all of it might go to your creditors.

• You should not use an IVA if:

• You have little or no spare income after essentials.
• Most of your debts are secured (like a mortgage or car loan).
• You expect to get a large windfall during the IVA.

How Does an IVA Compare to Bankruptcy and Other Debt Plans?

IVA vs. Bankruptcy

• IVAs last longer (five or six years vs. one year for bankruptcy).
• IVAs let you keep your home in most cases. Bankruptcy often means selling assets.
• Bankruptcy is more public and can affect more jobs.

IVA vs. Debt Management Plans (DMPs)

• IVAs are legally binding. DMPs are informal.
• IVAs write off remaining debt at the end if you finish the plan. DMPs don’t.
• Not all creditors need to agree to a DMP, but in an IVA, most must agree for it to start.

Alternatives to IVAs

• Debt Relief Orders (DROs): For people with very low income and few assets.
• Debt consolidation loans: These can be risky. They often mean borrowing more and sometimes putting your home at risk.

How to Decide If an IVA Is Your Next Step

An IVA can give you a clear path out of debt. But it’s not a quick fix and not right for everyone. Ask yourself:

• Do you owe at least £6,000 to two or more creditors?
• Do you have a steady income and can pay something each month?
• Do you want to avoid bankruptcy and protect your home or certain assets?

If yes, it’s time to take action.

Taking Your Next Step Towards Debt Freedom

Ready to move forward? Here’s what you can do now:

• Get free, regulated debt advice. Try StepChange, MoneyHelper, or National Debtline. They’re there to help, not judge.
• Look up insolvency practitioners on the Insolvency Service Register. Make sure yours is accredited.
• Compare IVA providers. Check fees, read reviews, and ask questions until you’re comfortable.
• Gather your financial paperwork. List your debts, income, and expenses before your advice session.
• Stay hopeful. No matter how deep the hole feels, there is always a way out. Every step you take gets you closer to a debt-free future.

TIP: I have seen how much faster things move when you prepare all your paperwork in advance. If you have payslips, bank statements, and details of your debts ready, you’ll save time and get more from your advice session.

What This Means for You and Taking Debt Solutions Forward

Facing debt is never easy. But knowing your options, like an IVA, means you’re already taking control. You don’t have to carry this burden alone, and you don’t have to figure it out overnight. Reach out for advice. Ask questions. Take small, steady steps. Every action you take now brings you closer to a fresh start and a more secure financial future.

You are stronger than your debts. And you can get through this. Start today by reaching out for help. Your future self will thank you.