What an IVA is

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay debts (often only partially) over a fixed period, typically five to six years, arranged through a licensed insolvency practitioner. Once approved by creditors holding a sufficient majority of the debt by value, it becomes binding on all included creditors, even those who voted against it.

How it differs from a DMP

Unlike an informal DMP, an IVA is legally binding — creditors included in the arrangement can't pursue you separately for the debt while it's in place, and often a portion of the debt is written off at the end if you complete all the agreed payments. This legal protection and potential partial write-off come with more formality, cost, and lasting impact than a DMP.

The impact on your credit file and finances

An IVA is recorded on your credit file for six years from the start date, significantly affecting your ability to get credit during that time and for some period afterward. It can also affect certain professions, and — depending on your circumstances — may require releasing equity from a property you own if the IVA runs long enough to include that as a condition.

What happens if you can't keep up payments

Missing IVA payments without agreeing a variation with your insolvency practitioner can cause it to fail, potentially leading to bankruptcy or leaving you exposed to creditors pursuing the original debt again — so realistic budgeting before entering an IVA, and communicating promptly if circumstances change, both matter considerably.

Getting independent advice first

Because an IVA is a significant, long-term legal commitment, getting free, independent advice from a debt charity before committing — rather than only speaking to a company that profits from setting up IVAs — helps ensure it's genuinely the right option for your circumstances compared with a DMP, bankruptcy, or other routes.

Key takeaways

  • An IVA is a legally binding agreement to repay debts, often partially, over five to six years.
  • It offers legal protection from included creditors, unlike an informal DMP.
  • It stays on your credit file for six years and can affect certain professions.
  • Get independent advice from a free debt charity before committing to an IVA.