If you’re feeling overwhelmed by debt, you might be looking into different ways to get back on track. An IVA (Individual Voluntary Arrangement) is a formal agreement that lets you pay back what you can afford over time, with the rest potentially written off.
In this blog, we’ll explain how an IVA works, who it could help, and what to consider before deciding if it’s the right option for you.
Table of contents:
- What Is An Individual Voluntary Arrangement (IVA)?
- How Does An IVA Work?
- What Are the Benefits of an IVA?
- Which Debts Can Be Included In An IVA?
- What Type Of Debt Can’t Be Included In An IVA?
- What If You Can’t Keep Up With Payments Into An IVA?
What Is An Individual Voluntary Arrangement (IVA)?
An IVA deals with unaffordable debt in England, Wales and Northern Ireland. It’s a legally binding agreement between you and the people you owe, allowing you to repay what you can through one monthly payment.
The IVA is set up and managed by a qualified insolvency practitioner like PennyPlan, and once it’s in place, creditors can’t take further action against you. If you keep up with the agreed payments, any remaining debt may be written off at the end of the arrangement.
For those living in Scotland, a Trust Deed would be the equivalent of an IVA.
How Does An IVA Work?
An IVA brings multiple debts into one manageable monthly payment, based on what you can afford. It’s set up with the help of a qualified insolvency practitioner, who works with you to create a proposal for your creditors.
Once the IVA is approved, it becomes legally binding. This means creditors must stick to the agreement, they can’t take further action or add extra charges. You’ll then make fixed payments, usually over five or six years. At the end of the term, any remaining included debt can be written off.
It’s a structured way to deal with debt that’s become unmanageable, giving you a clear end point and legal protection along the way.
What Are the Benefits of an IVA?
An IVA won’t be suitable for everyone, but for some, it can offer a structured and less stressful route out of debt. Here are some of the key benefits:
One affordable monthly payment: Based on what you can realistically afford, not what creditors demand.
Protection from legal action: Once approved, creditors can’t chase you or add interest and charges.
Debt written off at the end: Any remaining qualifying debt may be cleared once the IVA finishes.
No more juggling lenders: Everything is managed through your IVA, so you’re not dealing with multiple payments.
Clear end point: Most IVAs last five or six years, giving you a timeline to work towards.
Which Debts Can Be Included In An IVA?
To help you understand whether you could be eligible for an IVA, here’s some of the common debts that can be included:
- Overdrafts
- Personal loans
- Catalogue debts
- Council Tax arrears
- Hire purchase debts
- Mortgage shortfalls
- Credit Cards
- Store cards
What Type Of Debt Can’t Be Included In An IVA?
Unfortunately, not all debt can be included within an Individual Voluntary Agreement such as:
- Student loans
- Court fines
- Child maintenance or CSA payments
- TV licence arrears
- Social Fund loans
- Mortgage or rent arrears if you plan to stay in the property
Don’t panic though, an advisor will be able to guide you through your options.
What If You Can’t Keep Up With Payments Into An IVA?
Life doesn’t always go to plan, and if your income drops or unexpected costs occur, keeping up with IVA payments can be difficult. But, the good news is that you’re not locked in without support.
If your circumstances change, it’s important to discuss this with your insolvency practitioner as soon as possible. They might be able to adjust your payments and agree a short payment break or review the terms of your IVA.
Missing payments without contact could put your IVA at risk of failing, which may leave you liable for the full amount of your debts again. But with early communication and the right debt advice, it’s often possible to keep things on track.
Ready To Take The Next Step?
If you’re thinking about an IVA or just want to understand your options, we’re here to help. Our team offers free, confidential advice and will take the time to listen to your situation.
You don’t have to face debt alone – get in touch with us today and find out what support is available to help you move forward.
