How does an IVA affect you?

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This guide will explore IVAs in more detail, including how they can affect your home, finances, assets, job, and credit rating.

An Individual Voluntary Arrangement (IVA) is a popular debt solution that can help you repay your unsecured debt at an affordable rate over a set period.

But how does an IVA affect other areas of your life? And is there anything else you should know before signing up for an IVA?

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and the people you owe money to (your creditors) to repay your unsecured debt through a series of monthly payments based on what you can reasonably afford.

IVAs are supervised by an Insolvency Practitioner (IP), who is a financial professional authorised to act on behalf of individuals and companies facing insolvency. The main duties of Insolvency Practitioners (IPs) are to create your IVA proposal, communicate with your creditors, and distribute your monthly payments.

During an IVA, all interest and fees will be frozen and your creditors won’t be able to contact you. This means they can’t take legal action against you or add extra charges to your balance.

Once you’ve made your final IVA payment, any remaining debt will be written off and your creditors can’t seek any further repayments towards it.

How long does an IVA last?

An IVA usually lasts five years, but it can be extended by 12 months if you don’t pay what you agreed to within this time.

This can happen if you miss payments, have a payment break, or fail to release equity from your home during the final year of your IVA. Put simply, if the amount repaid at the end of the five years doesn’t match the amount listed in your IVA agreement, your IVA will be extended to give you time to make the extra payments.

Unlike other debt solutions which can last up to a decade, you can rest assured that you’ll have a clear end date with an IVA and, as long as you make payments in full and on time as agreed, you’ll be released from your debts after five years.

How does an IVA affect you?

An IVA can help you write off your unaffordable debt for a brighter financial future, but it isn’t without its risks.

We’ve outlined some of the ways an IVA can affect you below:

Your home

One of the most common questions among people considering an IVA is how it might affect their home.

However, unlike other debt solutions where you could be asked to sell your home to repay your debt (e.g. bankruptcy), your home will be protected in an IVA and you should have no problem affording your rent or mortgage alongside your monthly IVA payments.

Remember, your IP will take your income and expenses into account when drafting your IVA and will never set your monthly payments at a rate you can’t afford.

The only time your home will be considered is during the final few months of your IVA when you’re asked to release some of the equity from your home in order to pay your creditors.

Your finances

The purpose of an IVA is to help make your monthly repayments affordable and protect you from further debt.

However, you’ll usually be required to include any savings you have in your IVA to ensure your creditors are paid as much of the money they are owed as possible. This is also the case if you have a personal or workplace pension.

Owing debt to a bank also puts your bank account at risk of being frozen which can result in your money being taken and paid to your creditors without warning. This is why it’s highly recommended to switch bank accounts before starting an IVA and some IVA providers won’t proceed with your application until this step has been completed.

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Your assets

Generally, your assets won’t be affected by an IVA and you’ll never be asked to sell any items deemed necessary for day-to-day life, such as clothing, furniture, or white goods, in order to repay the debt.

However, your IP will ask you to declare any assets you have before you start your IVA and if they think you could get a cheaper alternative, they may ask you to downgrade and put the extra money towards your arrangement.

For example, if you drive a sports car, your IP will argue that the money is better spent on debt repayment and you’ll likely be asked to switch to a cheaper model.

Your job

Having an IVA should have no impact on any current or future employment prospects and you should be able to continue working in your current job or get a new job without any problems.

However, some occupations are bound by certain codes of conduct that prohibit you from being insolvent and having an IVA. These jobs usually fall within the accountancy, law, and financial service industries.

This information can be found by checking your employment contract or by arranging a confidential meeting with your HR department.

Your credit rating

Unfortunately, your IVA will be listed on your credit file for six years from the date it was approved. During this time, your credit score will be damaged and you’ll struggle to get approved for most forms of credit, from a personal loan and a mortgage to a phone contract and even a bank account.

Because most IVAs last five years, your IVA will more than likely still be visible on your credit file for another 12 months after your arrangement ends, making it difficult to access credit if you need it.

IVAs are also added to a public register called the Individual Insolvency Register (IIR) until three months after your arrangement ends. This register can be searched by anyone but is usually only accessed by employers, landlords, and lenders to verify details of your financial history.

Can I get credit with an IVA?

During an IVA, you are free to apply for credit of up to £500 but you must get written permission from your IP if you want to borrow more.

Applying for credit of more than £500 without informing your IP is a breach of your IVA and it could be terminated immediately as a result. When this happens, all restrictions will be lifted and you’ll need to find another way to repay the debt.

However, even if your IP gives you permission to apply for further credit, this doesn’t mean your application will be accepted and most lenders will still apply stricter limits and higher interest rates to counter the additional risk.

The likelihood of you getting credit with an IVA also depends on your individual circumstances and the type of credit required. For example, if you’re at the beginning of your IVA, your IP probably won’t let you borrow further, but if you require a car for work or childcare purposes, your IP may agree to let you apply for car finance.

Remember, IVAs are designed in a way that means most of your disposable income will go towards your arrangement. So, even if you’re allowed to borrow further credit, you may find that you have little to no money left for another monthly expense.

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What restrictions do I have to stick to in an IVA?

The success of your IVA will depend on whether you’re able to stick to certain restrictions and make your monthly payments on time.

We’ve summarised some of the main restrictions you’ll face in an IVA below:

Follow a budget

When you meet with your IP, they will review your income and expenses and help you create a budget that you should be able to stick to for the duration of your IVA.

By proving that you can stick to a budget and spend within your means, you should have no problem affording your IVA payments alongside any other financial obligations, such as housing costs and bills.

Avoid further credit

During an IVA, it’s important that you only apply for further credit if you’ve exhausted all other options and your IP has agreed to it. There is always a risk that you could fall into debt again if you take out a loan and are unable to afford your repayments.

However, the older your IVA gets, the less impact it has on your credit score and less weight it tends to carry. This means that your chances of being approved for credit should increase as your IVA ages.

Switching bank accounts

Before your IVA can begin, there is a chance that you will need to switch to a different bank account.

For example, if any of the debts included in your IVA are owed to your bank, your bank will probably freeze your bank account and deduct your funds to help them recover the money they are owed. When this happens, you will be unable to withdraw any of your money and could fall behind on your rent, mortgage, or bills as a result.

Cooperate with your IP

During an IVA, you must cooperate with your IP and answer any questions they have as open and honestly as possible. They are responsible for communicating with your creditors and distributing your monthly payments so the success of your IVA relies heavily on you getting along with them.

Similarly, if your circumstances change at any point during your IVA, you must contact your IP and explain the situation as soon as possible. They may be able to temporarily pause or lower your payments to prevent your IVA from failing.

Declaring windfall payments

Because IVA payments are based on your income and expenditure, any windfall payments (e.g. lottery wins, promotions, or inheritance) that alter your financial situation must be reported as soon as possible.

Most IVAs contain a windfall clause that outlines the steps you must follow if you come into a large sum of money but, in most cases, you’ll be asked to put 100% of the money towards your arrangement in a single lump sum.

Failure to declare a windfall payment will lead to your IVA failing and you’ll need to find another way to repay the debt.

What happens if I miss payments in an IVA?

IVA payments are based on your income and expenditure so you should never be in a position where you’re forced to choose between paying your debt or your essential living costs.

However, if your circumstances change (e.g. you lose your job) and you’re worried you might miss payments, you must inform your IP as soon as possible. They may be able to give you a temporary payment break, defer your payment date, or lower your payments until you get back on your feet.

Missing a monthly payment with no explanation will lead to your IP sending you a ‘notice of breach’, which is a letter asking you to explain why you missed a payment and what you should do to make things right. Usually, you will be asked to make up for the missed payment in full within a month and, if these conditions are met, no further action will be taken.

Missing several payments without contacting your IP will lead to your IVA failing. When this happens, your creditors will be free to take legal action against you if they wish and some IPs may even start bankruptcy proceedings against you.

Find out if an IVA is suitable for you


Individual Voluntary Arrangements (IVAs) are designed to help you settle your debts and improve your financial situation, but they aren’t without their risks and can affect several areas of your life.

Before agreeing to an IVA, you must do your research and seek impartial debt advice to ensure you understand how it could impact your home, finances, assets, job, and credit rating – especially if you’re a homeowner or work in a certain occupation.

Don’t hesitate to reach out to an experienced debt adviser if you have any questions about IVA eligibility. They will review your financial situation and confirm if you’re a suitable candidate for an IVA or if another debt solution would be better suited to you.

Key Takeaways

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to repay your unsecured debt in manageable instalments
An IVA usually lasts five years but it can be extended to six years if you miss payments
IVAs stay on your credit file for six years and you'll find it difficult to access further credit during this time
During an IVA, you should stick to a budget and avoid further credit if you can
Always inform your Insolvency Practitioner (IP) if you think there's a chance you could miss your next monthly IVA payment
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:


Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

May 29 2024

Written by
Maxine McCreadie

Edited by
Ben McCormack

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