If you’re considering an individual voluntary arrangement (IVA) to help manage your debt, this article aims to answer, as comprehensively as possible, the key facts you’ll need to know.
What is an Individual Voluntary Arrangement in the UK?
An Individual Voluntary Arrangement (IVA) is an agreement between an Individual (also known as a “Debtor”) and their creditors.
The debtor can make a Proposal offering repayment from future surplus income over a 1-5 year period or perhaps offering a lump sum payment. The IVA may require creditors to compromise on their debt to receive a pence in the pound distribution.
An IVA binds all unsecured creditors once it is approved by at least 75% by value of the creditors who vote in the decision procedure, subject to the further safeguard concerning associates of the debtor.
The Insolvency Practitioner (IP) function will be to act as a Nominee in presenting the Proposal to creditors and then if accepted will act as Supervisor of the Arrangement.
It is important that the IP should ensure that the Proposal is achievable and a fair balance is struck between the debtor and the creditors.
Why might an Individual Propose an IVA?
• The debtor may have received a statutory demand or bankruptcy petition from a creditor and an IVA might offer a better outcome for creditors than entering into Bankruptcy.
• The individual may be unable to settle a HM Revenue & Customs debt or perhaps a tax enquiry has resulted in a large penalty determination.
• An undischarged bankrupt might seek to annul the bankruptcy by entering into an IVA.
• The individual may be a professional (e.g. accountant or solicitor) and if bankrupt this could prohibit them from working and therefore an IVA might be an alternative to ensure that they continue in employment.
• The debtor may have difficulties in keeping up with monthly credit cards debts, loans and other monthly expenditure and an IVA may provide a mechanism to offer a coherent repayment plan and freeze interest.
• The debtor may be in a debt management plan and an IVA may provide finality in dealing with creditors.
There are various stages to the IVA process:-
Stage 1 – Initial Meeting
The IP in an advisory capacity will always offer a face to face meeting with the debtor. However, a meeting is not always necessary and can be conducted over the telephone or alternatively over a video call depending on the debtor’s attitude and the circumstances and complexity of the proposed IVA.
The IP will ensure that the debtor understands what is required of them during the IVA process and the consequence of entering into an IVA, including the rights to challenge the IVA by creditors and what may happen if the IVA is not approved or not successfully completed.
In addition, the IP will clearly set out the advantages and disadvantages of different personal insolvency options, not limited to the IVA so that the individual has an understanding of bankruptcy, debt management plans and other forms of informal debts solutions and the likely costs involved.
The advice will need to focus on the debtor’s personal circumstances, taking into account the debtor’s assets, in particular the family home and on any third parties that might be affected.
Sufficient information will need to be obtained in order for the IP to be satisfied that measures are to be taken by the debtor to avoid the recurrence of these financial difficulties in the future.
Stage 2 – The Individual Voluntary Arrangement Proposal
The Proposal sets out the terms of the Arrangement between the individual and their creditors’ and forms the basis of offering a deal to creditors.
The Proposal is delivered to creditors together with the nominee’s report, and creditors then vote on it in a decision procedure. It includes a background and financial history; the reasons as to why they have become insolvent; any attempts to solve their financial difficulties; a comparison of the estimated outcomes of the IVA compared to bankruptcy; a statement of affairs and any cash flow projections.
Stage 3 – The Nominee
The IP will act as the Nominee in presenting the Proposals to creditors and has a duty to report on the contents of the Proposal. This information is contained within the Nominee’s report which is circulated to creditors together with the Proposal.
The nominee will need to consider and report to creditors whether or not:
1. The debtor’s financial position is materially different from that contained in the Proposal, explaining the extent to which the information has been verified.
2. That the IVA is manifestly unfair.
3. That the IVA has a reasonable prospect of being approved and implemented.
An Interim Order, Where One Is Needed
Most IVAs are put together without one. An interim order is a court application, and it is worth making only where a creditor is actually threatening action that cannot wait — a bankruptcy petition already presented, or enforcement about to happen. If nothing is imminent, the proposal goes to creditors without it.
Where one is obtained, it stops creditors taking or continuing action against the debtor while the proposal is prepared, giving a short period of protection.
While an interim order is in force, a landlord cannot exercise a right of forfeiture over business premises without the court’s permission, and no other legal process can be started or continued against the debtor without permission either.
Where an IVA is a straightforward consumer arrangement, it will usually be run under the Insolvency Service’s IVA Protocol. The current version, the IVA Protocol 2025, applies to protocol IVAs from 1 July 2025 and replaced the 2021 version. Among other things it requires the provider to give you a plain-English key facts document before you sign anything. It is worth asking whether the IVA you are being offered is a protocol IVA, and reading that document before you commit.
To obtain the Interim Order the debtor will file in court:
1. The Proposal
2. The Notice of Proposal signed by both himself and the Nominee
3. The application for an Interim Order accompanied by a witness statement
Where an application is made, the nominee must report to the court before the Interim ceases to have effect (14 days from the day after the making of the order) on:
• Whether the IVA has a reasonable prospect of being approved by creditors and implemented
• Whether the Proposal should be put to creditors for a decision
• Which decision procedure should be used, and the dates for it. Since the Insolvency (England and Wales) Rules 2016 this is normally correspondence or electronic voting rather than a physical meeting
Stage 5 – The Creditors’ Decision
Creditors are invited to vote on the proposal and to submit their claims. Since the Insolvency (England and Wales) Rules 2016 the vote is taken through a decision procedure, which may be correspondence, electronic voting or a virtual meeting, and creditors can vote by proxy. The proposal is accepted if at least 75% by value of the creditors who vote are in favour, subject to the further safeguard concerning associates of the debtor.
Creditors often propose modifications to the terms. The decision procedure can be adjourned for up to 14 days so that the nominee and the debtor can consider them. A modification only takes effect if the debtor agrees to it.
If the creditors reject the Proposal or cannot agree on the modifications, the Proposal will be rejected and it is likely that the debtor will need to consider other forms of insolvency options including Bankruptcy.
Stage 6 – Implementation of IVA
Once the Proposal has been accepted, the Supervisor will notify the creditors, the debtor of the final form of the accepted IVA.
The Supervisor will have a duty to ensure that the IVA is carried out in the accordance with the terms of the Proposal. The Supervisor will hold a client account and will monitor that contributions are received in a timely manner and that creditors receive the agreed level of dividend as per the Proposal.
The Supervisor will have a duty to review the debtor’s income and expenditure and tax return on an annual basis, to analyse whether there needs to be an increase in the level of yearly contributions or any change of circumstances.
On an annual basis the Supervisor will circulate to creditors a progress report to creditors which details the level of payments received into the IVA, ensuring that the debtor is not in any arrears and includes dividend payments made to creditors.
Stage 7 – Variation
Due to unforeseen circumstances, the debtor may require a variation to the terms of the IVA, after all an IVA can last sometimes for a period of 5 years. For example:-
1. The debtor falls into arrears with contributions.
2. The debtor becomes unemployed for a short period of time.
3. The forecast minimum dividend is no longer achievable.
4. The equity release or sale of the matrimonial property coming into the IVA is delayed.
Creditors are told about any proposed change to the original terms of the IVA, and the variation needs the agreement of at least 75% by value of the creditors who vote on it.
Failure to agree on the variation may result in the IVA being terminated.
Stage 8 – Failure
If during the course of the IVA, the debtor is in breach of the terms of the Arrangement, then a Notice of breach will be issued to the debtor for example, non-payment of contributions for a period of more than 3 months.
The debtor will have a short period of time to remedy the breach. However, if this cannot be remedied, then the Supervisor will fail the IVA and depending on the clauses contained within the Proposal, will petition the debtor’s bankruptcy.
Stage 9 – Completion of the Individual Voluntary Arrangement
Once the terms of the IVA have been completed, the Supervisor will issue a Certificate of Completion to the debtor, creditors and the court to confirm that the IVA has been concluded.
How does an IVA affect your life?
An IVA is likely to impact your life for a period of time.
Job
It is unlikely to affect your professional life unless you work in a sensitive industry , where an IVA may mean restrictions or, in some cases, an inability to practice. The key industries where restrictions may apply are:
- law
- accountancy
- property
- finance
Each employer will differ, you’ll need to refer to your employment contract to establish the implications.
Assets
Arranging an IVA won’t affect the every day possessions in your home.
If you have particular assets of value you will need to discuss these with the insolvency practitioner working on your case. You will also need to be fully honest with the IP about the things you own, in order to be compliant with the law.
Future Income
An IVA may certainly affect your future income, and/or assets which come into your possession during the period of the arrangement.
AN IVA is based around what you can afford at any given time and this is weighed carefully before the arrangement is agreed upon. It stands to reason that if your situation changes for the better then this should benefit those creditor waiting to be paid.
Again, you will need to keep in communication with the IP working on your case if your situation should change.
Can I do an IVA Myself?
It is not possible to arrange an IVA by yourself. Rather, there is a legal requirement to engage the services of an insolvency practitioner.
The Insolvency Practitioner will work with you to put the proposal together, negotiate with creditors and oversee the IVA for as long as it lasts.