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Applying for an Individual Voluntary Arrangement (IVA)

Older woman stood facing forward with her hand on her hip and smiling broadly.
All you need to know about applying for an IVA. 

What is an IVA?

An IVA is an agreement with your creditors to pay your disposable income (the money left each month after you’ve paid bills and other household needs) towards your debts for a period of five to six years. After this time, the remainder of your debts will be written off.

Please note

This option is only available to those living in England, Northern Ireland and Wales.

What does IVA stand for?

IVA stands for Individual Voluntary Arrangement.

Can I apply for an IVA?

To set up an IVA you either need enough reliable disposable income to pay into your IVA each month, or you need a lump sum (in which case you’ll apply for a Lump Sum IVA). Ultimately, it’s down to your creditors to accept the IVA proposal.

A Lump Sum IVA is a Lump Sum Individual Voluntary Arrangement. With a Lump Sum IVA, instead of making monthly payments to your debts, you pay one single lump sum.

If you have both a lump sum and significant disposable income, it’s unlikely that your Lump Sum IVA application would be accepted. However, it is possible that a lump sum could make up part of an IVA proposal where you would still be expected to pay into the IVA for 5–6 years.

How do I apply for an IVA?

We will take a look at your individual circumstances and financial situation to determine if an IVA could be right for you.

If we think an IVA is suitable for you, CAP will check with a trusted IVA provider to see if they think an IVA proposal would be accepted by your creditors. This will be dependent on your personal circumstances, assets, disposable income (money left over after paying bills and other household necessities) and who you owe money to.

If the provider agrees it’s likely you’d be accepted, then we’ll refer you to this IVA provider, who will then set up and run your IVA. Your CAP Plan will be closed at this stage, and the IVA provider will take you through the process to becoming debt free.

The IVA provider will negotiate the terms of your IVA with your creditors. If creditors holding 75% of your debts agree, the IVA will be set up.

Once the IVA is set up, your creditors are legally bound by it. Interest and charges on your debts should be stopped and they can no longer chase you for your debt.

You’ll need to work with your IVA provider to maintain your IVA.

If you find you can no longer afford your monthly IVA payments, then it is important that you let your IVA provider know. Your IVA provider may be able to renegotiate your payments, or arrange a payment holiday. 

If your financial situation changes for the better, then you should also let your IVA provider know. They should review your circumstances each year, and if you don’t let them know about increases in income or lump sums received, you may have broken your IVA agreement. It is likely that you would have to increase your payments and that lump sums may need to be paid into the IVA.

If you realise that you have missed a debt from your IVA, then let the IVA provider know and they will advise you on what to do.

When you reach the end of your agreed IVA, then your IVA is marked as complete. This means you’ll be debt free.

How long does an IVA last?

An IVA usually lasts for at least five years. A Lump Sum IVA is much quicker and should be resolved as soon as the lump sum is divided amongst the creditors.

How long does an IVA take to set up?

It usually takes around six weeks to set up an IVA. It can be more or less depending on how quickly you send supporting evidence to our debt advice team.

Can IVA payments be increased?

Your IVA provider will review your repayments every year. If your financial situation changes in between a repayment review, for example if you get a new job or a wage increase, you must inform your IVA provider. They will then decide whether your repayments should be increased.

How long does an IVA stay on your record?

An IVA will stay on your credit report for six years from the date it was approved. If your IVA finishes earlier, it will still stay on your report until six years has passed but will be marked as ​‘complete’.

How does an IVA affect your life?

During your IVA, your name will be on the Insolvency Register. IVAs are listed in the public domain and will also appear on your credit report for six years. This could make it more difficult to take out credit.

IVAs can also affect some jobs. If you’re an accountant, solicitor or in a position of financial responsibility, you must check if an IVA would affect your employment.

During the IVA you are not allowed to be the trustee of a charity.

Frequently asked questions

If you are currently renting privately, you will need to check your tenancy agreement in case there is a clause that says you aren’t allowed to be insolvent whilst living at that property. Your landlord won’t be told about your IVA but they could find out if they checked your credit rating.

Your credit rating will be affected during an IVA so if you want to move somewhere new or start a new tenancy contract that requires credit checks, you may struggle to get a landlord to agree to rent to you. This might not be as much of an issue if you rent with someone else or get a guarantor who would agree to be liable if you can’t pay the rent. The most important thing is to be honest and upfront when you are applying for a property. This way your landlord or letting agent will be more likely to help.

You could still pass credit checks from some types of credit if you have an IVA, although your options will be limited and the credit will usually have low limits and high interest rates. Be aware that every application for credit you make will negatively impact your credit score.

It’s important to remember that you can’t take out any credit of more than £500 without getting written approval from your IVA Supervisor first. 

You can open a new bank account during an IVA, but you may find certain banks won’t accept your application. This is because during an IVA your credit rating is affected. However, there are specialist accounts designed for people with poor credit ratings you could apply for.

You can get a new phone contract during an IVA, but you may find that some mobile providers will not accept your application once they have done a credit check. This is because during an IVA your credit rating is affected. You may find you have more success applying for a SIM-only deal or choosing a Pay As You Go option.

Having an IVA shouldn’t affect most jobs. However, some jobs involving having control over money will be impacted by an IVA. These could include jobs in the financial sector, accountancy or property conveyancing. An IVA may mean you can no longer do that job or you may be restricted in what duties you can perform. 

Before you apply for an IVA, you must find out whether your job will be affected and if there are any risks to your livelihood.

Once your IVA has been completed you will be officially debt-free. After three months, your name should have been removed from the Insolvency Register. 

The IVA will be removed from your credit file after six years has passed.

Your mortgage won’t usually be included in your IVA. Therefore, you will need to continue making your normal payments. If your mortgage rate changes and you find yourself needing to make higher mortgage payments, you can contact your IVA Supervisor who may be able to adjust your IVA payments accordingly. 

It may be very difficult to get a new mortgage whilst you have an IVA as your credit score is affected. 

Go back to other potential routes out of debt

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