IVA pros and cons

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This article will outline the pros and cons of an IVA so you can make an informed decision about how to deal with your unaffordable debt.

Since IVAs were first introduced in the 1980s, they have helped millions of people deal with their unaffordable debt.

But before committing to an IVA, it’s crucial you understand how it can impact different areas of your life – not just your finances.

Like most debt solutions, there are various pros and cons to being in an IVA.

For example, your credit rating will be damaged for six years but any remaining debt will be written off at the end of your arrangement.

What is an IVA?

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

Once your IVA starts, all interest and charges will be frozen and your creditors will be instructed to stop contacting you about the debt.

This can allow you to focus on repaying what you owe without being distracted by threatening phone calls or your outstanding balance increasing.

With an IVA, your debts will be consolidated into a single monthly payment which will be sent directly to your Insolvency Practitioner (IP). They will then deduct a small chunk of the money to cover their fees before distributing the remaining amount among your creditors. Secured debts, like court fines, student fines, and mortgage arrears, can’t be included in an IVA.

Most IVAs last a total of five years but your arrangement can be extended by an extra 12 months if you miss payments, reduce payments, have a payment break, or can’t release equity.

When your IVA comes to an end, any remaining debt will be written off and you will be free to get on with your life.

How does an IVA impact your life?

Having an IVA can impact your life in several ways. Here are just some of the factors you must consider before deciding to enter into an IVA:

Your finances

The most obvious impact of an IVA is how it can affect your finances and your credit score in particular.

Once your IVA starts, it will be added to your credit file for six years. During this time, you will be limited in the financial decisions you can make and will struggle to access further credit, such as a loan, mortgage, bank account, or phone contract.

Your future plans

Because a typical IVA lasts five years, you must consider whether your arrangement would impact your ability to commit to any future plans, such as moving home, getting married, or starting a family.

Having an IVA won’t stop you from doing any of these things, but your disposable income will be significantly reduced and this can have an impact on how much you’re able to set aside for major life events.

Your reputation

When you enter into an IVA, your details will be added to the Individual Insolvency Register (IIR) until three months after your arrangement ends.

This is a public database containing details of all active insolvencies in England and Wales, including IVAs and DROs.

However, while anyone can, in theory, search for your details on the IIR, it is usually only accessed by lenders, landlords, and employers when they need to verify details of your insolvency.

So unless anyone has cause to believe you are in an IVA and goes to the effort of searching your name on the register, it’s unlikely your friends, family, or colleagues will find out.

Your home

When you apply for an IVA, your assets will be protected and you’ll never be asked to sell your home to repay the debt.

However, if you own your home, your IP will usually ask you to release equity during the final few months of your arrangement.

This is to give your creditors a final opportunity to recover as much money as possible before your IVA ends and your remaining debt is written off.

Your job

There are no laws in place requiring you to inform your employer about an IVA and, in most cases, having an IVA will have no impact on your ability to get a job or keep your existing job.

However, some employment contracts contain a clause that outlines how being insolvent could affect your job.

This might mean you need to inform your employer of your financial situation, can no longer practice, or must meet certain conditions to be able to continue in your current role.

The jobs most likely to be affected by an IVA are bankers, solicitors, accountants, and lawyers.

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What are the pros of an IVA?

An IVA is just one of the many debt solutions that can help you tackle unaffordable debt, so why should you choose an IVA over any other debt solution?

Here are some of the pros of having an IVA:

Affordable monthly payments

When your IP is drafting your IVA proposal, they will base your monthly payments on the information you provided about your income and expenditure.

Put simply, your monthly IVA payments will equal the amount of disposable income left over after essential costs like housing and utilities have been covered.

This is to ensure you’re repaying as much as you can towards your debt and your creditors are receiving a significant chunk of what they’re owed.

Because your payments are based on affordability, you should never be made to pay more than you can afford or an amount that you’re not entirely comfortable with.

Frozen interest and charges

Most unpaid debts accumulate interest and charges over time, but if you’re repaying a debt with an ever-increasing balance, you could end up paying more than you originally owed in extra fees alone.

From the moment your IVA is approved, all interest and charges will be frozen so you can focus on chipping away at your debt without worrying about your balance growing.

No creditor contact

During an IVA, your creditors won’t be able to contact you about the debt until your arrangement comes to an end and must communicate with you through your IP instead.

This means they can’t harass you for the money owed, demand payment, or ask you to make payments outside of your arrangement, removing the possibility of legal action and allowing you to focus solely on repaying your debt.

Remaining debt is written off

The main aim of an IVA is to allow you to repay a sizable chunk of your debt while ensuring your creditors receive regular payments towards what they’re owed.

Once you’ve made your final payment, any outstanding debt will be automatically written off and you’ll be declared debt-free (as long as you don’t have any other debts).

During your IVA, you’ll only be expected to repay around 25% of your total debt. For example, if you owe £38,000 and your creditors agree to monthly payments of £230, you’ll only repay £13,800 (36%) over five years and the remaining £24,200 (63%) will be written off.

Your assets are protected

Unlike bankruptcy where your belongings can be seized and sold, your assets will be protected in an IVA. This means that, even if you don’t keep up with your monthly payments, you’ll never be forced to sell your home or car to repay the debt.

However, if you own your home, you could be asked to remortgage in the final few months of your arrangement to release some extra funds before your outstanding debt gets written off.

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What are the cons of an IVA?

An IVA can help you repay your unsecured debt at a rate you can comfortably afford, but it isn’t without its drawbacks. Here are some of the pros of having an IVA:

Your credit rating will be affected

When you have an IVA, it will be added to your credit file for six years. This will automatically lower your credit rating and make it difficult to access most forms of credit, such as a loan, mortgage, phone contract, or bank account.

So if your IVA lasts the standard five-year term, you’ll have to live with it on your credit file for another 12 months.

There are fees involved

While you only need to repay a percentage of your total debt with an IVA, there are a number of fees involved.

Because of this, some IPs will advise against an IVA if you owe less than £10,000.

However, because most fees are taken directly from your monthly payments, you should never be caught out by hidden fees or asked to make payments other than those clearly outlined in your IVA proposal.

Your term can be extended

Most IVAs last five years – which is equivalent to 60 monthly payments – but your arrangement can be extended by an extra 12 months if you miss payments, reduce your payments, have a payment break, or can’t release equity.

This can be disheartening if you expect to leave your IVA after five years, but it does mean the IVA will be removed from your credit file at the same time as your arrangement ends.

Your details will be publicly visible

When your IVA starts, it will be added to the Individual Insolvency Register (IIR) until three months after your arrangement ends.

This is usually only viewed by lenders, employers, and employers, but can be accessed by anyone.

Some people are uncomfortable with details of their financial situation being publicly available and may be less likely to enter into an IVA if they know there is a chance someone could find out about it.

Your arrangement can fail

While rare, your arrangement can fail if you fail to stick to the terms as outlined in your IVA proposal.

Typically, an IVA will fail if you don’t keep up with your monthly payments or fail to inform your IP of any major changes to your financial situation.

When this happens, you’ll no longer be protected and will be expected to find another way to repay what you owe.

This also means that your creditors will be free to take legal action against you and interest and charges can start accumulating again.

There is a solution for you

Is an IVA right for me?

If you’re struggling with unaffordable debt, you may be wondering if an IVA is right for you or if another debt solution would be better suited to your financial situation.

Thankfully, there are various checks you can carry out to ensure you’re making the right decision by choosing an IVA.

Here are just some of the questions you should ask yourself if you’re considering an IVA:

  • How much do I owe?
  • How much can I afford to repay each month?
  • Will my job be affected?
  • Am I in a position to release equity from my home?
  • Can I afford the IVA fees?
  • Do I have any major life events planned?

During your first meeting with an IP, you should be able to answer these questions and determine whether an IVA or another debt solution is the best option for you at this time. 


An IVA can help you repay your unsecured debts through a series of monthly repayments based on what you can afford.

However, before committing to a formal debt solution, you must familiarise yourself with the various IVA pros and cons.

For example, while an IVA can consolidate your debt into an affordable monthly payment, it can be an expensive endeavour once fees are factored into the equation.

Whether an IVA is a good idea for you depends on your personal circumstances. An IP should be able to talk you through your options and advise if an IVA is the best debt solution for your financial situation. 

Key Takeaways

An IVA can help you repay your unsecured debt by consolidating your balance into affordable monthly payments
Being in an IVA can affect various areas of your life, including your finances, future plans, reputation, home, and job
Because your monthly IVA repayments are based on your income and expenditure, it should always be an amount you can easily afford
Most IVAs last five years, but your arrangement can be extended by 12 months if you miss or reduce payments or can't release equity from your home
Always do your research and determine your eligibility before committing to an IVA for five years
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

November 8 2023

Written by
Maxine McCreadie

Edited by
Ben McCormack

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