v IVA Process

IVA Process

Introduced as part of the 1986 Insolvency Act, the Individual Voluntary Arrangement, or IVA as it is more generally known is a formal debt solution.

At the time of introduction its main aim was to provide an alternative option to bankruptcy for business directors and entrepreneurs who wanted to protect their professional status or assets, which would otherwise be vulnerable to the bankruptcy process.

In more recent times the IVA has become an extremely popular debt solution for people who've found themselves victims of the UK's credit culture.

IVA Process Overview

An IVA is a formal debt solution based on a repayment agreement between a debtor (a person owing money) and their unsecured creditors (the people they owe the money to).

An IVA is a legally binding agreement that allows the applicant to offer reduced payments based on affordability, to their unsecured debts for a prearranged fixed term of, normally, 5 years.

An IVA can only be proposed and administered through a licensed Insolvency Practitioner (IP).

IVA qualification

Not everybody that wants to enter an IVA will find the solution suitable when applied to their personal circumstances.

Equally, creditors will be keen to ensure IVA proposals are commercially viable. They can do this by insisting on a minimum amount to be paid back through the IVA process, based on the size of the original debt, to make sure the IVA is worth their while.

There is no minimum debt level required to enter an IVA, however, it is generally agreed that an IVA becomes a viable debt solution for those with a minimum of £10,000 unsecured debt, owed to 2 or more different companies.

Your employment status is not particularly important, so long as you can demonstrate you have sufficient financial resource required to maintain regular monthly payments of sufficient size as to satisfy your creditors..

You can also apply for an IVA if you are self employed, as can people who are in Partnerships, L.L.P's and Directors of limited companies.


It's remarkable how few people have heard of the IVAs, or confuse an IVA with the other, more common debt solution of a Debt Management Plan (DMP).

In contrast to an IVA, a DMP is actually an informal agreement and does not give any legal protection, can't guarantee to freeze interest or provide any debt write-off.

IVA vs bankruptcy

An IVA serves as an alternative to bankruptcy for people whose occupations would be adversely affected by bankruptcy.

For example; Company Directors, Police Officers, Prison Officers, Armed Services Personnel, Accountants, Lawyers, Insolvency Practitioners, high ranking Civil Servants. These occupations as well as some other qualified professionals would face possible sanctions if they declared themselves bankrupt.

Unlike bankruptcy, an IVA is essentially a private agreement and is not published in the press.

For further information about the IVA and bankruptcy options click here: IVA vs Bankruptcy

IVA benefits

During the IVA, creditors are legally obliged to freeze interest and must not add late payment charges to the applicant's outstanding debts.

Creditors must also refrain from contacting the applicant in relation to the outstanding debts for the duration of the IVA.

Once the IVA has been successfully completed, any outstanding balances are legally written-off, leaving the applicant completely debt free.

Full and final settlement IVAs

Acting as an alternative to the typical 5 year IVA there is also the Full and Final Settlement IVA.

N.B: This type of IVA is less common than the traditional 5 years IVA and is used to assist people who are unable to afford an IVA via monthly contributions but, instead, have access to a lump sum.

The lump sum can be generated by the sale of assets owed by the applicant, or provided through a 3rd party, but either way the funds are offered to creditors through a Full and Final Settlement IVA.

The Full and Final Settlement IVA carries all the same benefits for the applicant as the traditional 5 years IVA, ensuring all creditors are legally bound to the settlement once an agreement has been reached with the necessary majority of creditors.

The complete IVA Process

Once an applicant has decided that an IVA is their preferred course of action, an IVA consultation is undertaken.

During the consultation all the personal circumstances surrounding the case are discussed, to ensure an IVA is actually a viable solution, and a financial assessment is undertaken to establish the size of the proposed IVA payments.

The IVA's monthly repayments are calculated and set to a level which is proven to be affordable for the applicant, once their normal and reasonable living expenses have been accounted for.

These include priority payments such as rent or mortgage, vehicle running costs, utility bills, council tax and all other household costs, such as allowances for food and clothing.

Introducing the Nominee

The case is then passed to a external licensed Insolvency Practitioner (IP) who, in turn, undertakes the role of the IVA Nominee, and arrangements are made for an IVA proposal to be drafted.

This is the name given to the legal document that outlines the terms of the IVA. It's prepared by an IVA drafter, a key member of the IP's team.

It's during this part of the IVA process that care is taken to account for the all applicant's assets, including equity in any property they may have, endowment policies or saving plans etc.

If the applicant has equity in a property, or an endowment policy, it should be declared in the proposal.

When the Nominee is satisfied the IVA proposal is ready, it will be sent to the applicant for confirmation the details within it are correct. Once the applicant is satisfied with the IVA proposal, they are required to sign and return it to the Nominee.

This process will normally be completed within a 2 weeks time frame, but can take longer if the Nominee's workload is heavy.

Once signed and returned, the Nominee lodges the IVA proposal with the Court and notifies all creditors of the proposed IVA.

Interim Orders

In some circumstances, a creditor may have already begun legal action against the IVA applicant. In such cases, and at the sole discretion of the appointed Nominee, it's possible to apply for an Interim Order.

An Interim Order will protect the applicant from any further Court action being taken until the outcome of the IVA's Creditors' Meeting is known.

Creditors' Meeting

The next stage of the IVA process is the Creditors' Meeting.

Creditors must be given a minimum of 17 days notice of the Creditors' Meeting, during which they cast their vote to either accept or reject the proposed IVA.

There is no legal requirement for the applicant to be present at the Creditors' Meeting, but they should be contactable via a telephone whilst the meeting is being held.

Creditors must vote to 'accept' the IVA proposal during the Creditors' Meeting for it to become legally binding and there is a complicated voting procedure by which all IVA's are deemed to have been accepted or rejected.

Voting rules

The voting rules of an IVA state that providing 75% (in debt value terms) of those creditors that have voted, vote to accept the proposals (with or without modifications) then the IVA is 'accepted' and becomes legally binding on all other parties, whether they voted to accept or not.

The effect of this is that, any creditor who chooses not to vote at the Creditors' Meeting is bound by the decision of those who do.

IVA modifications

An IVA can also be accepted with conditions attached. These conditions are called 'modifications' and can range from modifications curbing the Insolvency Practitioner's fees through to modifications to the size of IVA contributions.

Please Note: If there are modifications made to the IVA proposal at the Creditors' Meeting, the applicant will have the opportunity to accept or reject the modifications, before the IVA becomes legally binding.

Failing to accept the modifications would cause the IVA to be considered rejected and it would not become legally binding.

Accepted IVA

Once the IVA is accepted it becomes legally binding on all the creditors involved, whether they voted in favour of the IVA or not.

Equally, should a creditor decide to not vote at all, they will be bound by the decisions of those creditors that did.

Next the IVA is recorded on the IVA register and it will remain on the register for its full duration.

Introducing the Supervisor

From this point onwards, the Insolvency Practitioner undertakes the role of IVA Supervisor, ensuring the IVA terms are upheld by the applicant for the duration of the IVA.

Payments made into the IVA by the applicant are distributed to creditors on a pro-rata basis for the duration of the IVA.

The responsibility for making the IVA repayments lies solely with the applicant and they should make every effort to keep up the repayment schedule as a failure to maintain repayments could lead to the failure of the IVA.

Should the applicant experience payment problems whilst in the IVA, the Supervisor ought to be informed immediately.

The Supervisor has several options available to them to assist the IVA applicant including offering a payment break or a reduction in payments.

If necessary a Variation Meeting can be called, at which an amendment to the original IVA can be agreed with creditors.

Successful completion

On the successful completion of the IVA, the Insolvency Practitioner (IP) will notify all the creditors involved, and provide the applicant with a 'completion Certificate' or 'Notice of completion'.

As part of the IVA's terms, any debts that have not been repaid through the IVA must be written off by the creditors and the applicant will be considered debt free.

After the IVA, the applicant is free to begin rebuilding their credit worthiness. A copy of the 'completion Certificate' should be sent to the main credit agencies, Experian, Equifax and Call Credit and their credit file will be up dated, recording the successful completion of the IVA.

The credit file will carry the IVA for 6 years in all, starting at the IVA start date but, after the 6 years have elapsed, the credit file will have no mention of the IVA. However, gaining credit may remain difficult for a short time.

Finally, a check should be done 3 months after the IVA's completion, to ensure the details have been removed from the IVA register.

Professional Advice.

The team behind IVA.info have been helping people enter IVAs for over a decade and have built up a remarkable level of expertise along the way.

We're not a call centre, but actually a small team of professional IVA specialists who, dare we say, know our onions.

So, if you'd like to have a chat about your circumstances with a professional IVA adviser why not call our helpline on 0800 088 7502 where we're waiting to help you.

Or, alternatively, complete this form and one of the team will call you back at your preferred time.

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