Is an Individual Voluntary Agreement (IVA) ever a good idea?

Understand what an IVA entails, what it is and when it is a good idea to utilise one

Posted by BT Admin on February 9, 2020

An Individual Voluntary Agreement is a contract that a debtor makes with his creditors to repay part or all of their debts. You, as the debtor, consent to make payments regularly to their preferred insolvency practitioner (IP). The IP divides the money amongst your various creditors.

An IVA gives you better management of your assets in comparison to filing for bankruptcy. This is attributed to the fact that, while repaying your creditors through an IVA, you take accountability for your debts. You are, in essence, paying the debts, albeit slowly. This kind of arrangement enables you to repair your credit rating, which would not happen if you were declared bankrupt.

Insolvency Practitioner (IP)

An IP is an individual authorised and licensed to work on behalf of an insolvent individual or company. Insolvency Practitioners are insolvency specialists or accountants who work in accounting firms.

How it works

Insolvency Practitioners are either accountants or lawyers. Once you engage their services, you will pay a fee to cater for the IVA. The fee is determined by the amount of money you will pay back via the IVA. When the IVA is working, you cannot receive additional credit. However, once it elapses, you can seek more credit. An IVA provides an excellent avenue for the debtor to create a solid financial prospect within a short time. Before you get into an agreement with an IP, find out how much it will cost you. An IP in a debt management company can be more expensive as they have another charge besides the IP’s fees.


Your chosen IP assesses your finances while considering your revenue, assets, liabilities, and debts. The IP uses the information gathered to come up with a workable reimbursement plan for you. The IP will negotiate on your behalf which also includes any legal requirements.

After agreeing on the number of your payments, your IP will consult your creditors. The IVA becomes effective once the creditors who hold 75% of your total debts consent to your repayment plan. The remaining 25% have no option but to consent to your terms once the others have agreed to it.


When you gauge your ability to make the payments, you will then decide to take the IVA or not. An IVA is a good way to repay your loans if you feel that you can make the payments comfortably. A successful IVA gives the best outcome concerning future solvency.


An IVA shields you from your creditors. An IVA stops any legal action by creditors as it is recognizable by law. In the process of drawing up the agreement, the court issues Interim Orders to prevent any legal proceedings, and once it is accepted, your creditors cannot pursue you any further.

How IVA repayments work

Once you decide to pursue this action, the IP will assist you in crafting a workable repayment plan. You can choose to make the repayments in instalments, monthly, or via a lump sum. You should agree to a repayment amount that you can pay comfortably and to which your creditors agree. Monthly repayments of the IVA last for at least five years.

You do not make the repayments directly to your creditors; instead, you pay to the IP which then distributes the money to all your creditors. Parts of the repayments remain with the IP as their fees of service. If you still owe money by the end of the agreement, you are not obliged to pay the remaining amount. If you come into a large sum of payment such as winning the lottery or enter into an inheritance when the agreement is effective, the money will be used to pay your debts.

Individual Insolvency Register

Once the agreement is in effect, it becomes a public record at the Individual Insolvency Register where it sits pending the expiry of the contract. When you are on the register, it affects your chances of obtaining new credit as it lowers your credit score.

Obtaining new credit with an operational IVA

As explained above, obtaining additional credit during an IVA is difficult. However, there are exemptions to this; like when you are obtaining the money to cater for living expenses that involve your family. Also, if you are a sole proprietor or own a company, you can obtain finances to run the business. But, due to your low credit score attributed to the IVA agreement, creditors will charge you more interest than average. Any additional credit above £500 will require you to submit written consent to your creditor prepared by the insolvency practitioner.

In conclusion, an IVA is a good way of reorganizing your finances. If you feel that you are stuck and you are unable to repay your loans faithfully, take an IVA instead of filing for bankruptcy. This will also shield you from legal action from the creditors and give you more time to repay your loans.