Advantages and disadvantages of an IVA

If you are struggling with an unmanageable level of unsecured debt that you can’t afford…

If you are struggling with an unmanageable level of unsecured debt that you can’t afford to repay within a realistic amount of time, but that you can commit to making regular reduced monthly payments towards, an IVA (Individual Voluntary Arrangement) may be right for you.

However, it is important that you understand the advantages and disadvantages of IVAs before you decide whether this might be the right way for you to clear your debts.


1.      Lower your monthly payments ­- with an IVA, your payments will be based on what you can actually afford after taking into account all your essential expenses (including mortgage/rent and utility bills).

2.      Write off the debt you can’t afford to repay­ – once you have made your final payment, the IVA will come to a successful conclusion and your unsecured creditors will write off any outstanding debt.

3.      Help meeting your other monthly expenses – the payments you make towards your IVA will be calculated to leave you enough for your other commitments (mortgage/rent payments, food, travel, etc.).

4.      Your home will almost certainly be safe – if you’re a homeowner, an IVA is very unlikely to force the sale of your home.

5.      IVAs are legally binding – and once your IVA has been approved, your lenders won’t be able to take any legal action against you (including trying to make you bankrupt) as long as you stick to your side of the agreement.


1.      Homeowners may be required to release equity – if you are a homeowner, you may be required to free up some of the equity in your home so you can repay more of your debt.

2.      Damage to your credit rating – an IVA will stay on your credit report for six years from the time it starts, making further credit harder and/or more expensive to obtain.

3.      An IVA will last longer than bankruptcy – in general, you would be discharged from bankruptcy after one year (although you might have to make payments for three years). An IVA usually lasts 5 years.

4.      Restrictions on the amount you can borrow – while the IVA is underway, there will be restrictions on taking out further credit.

5.      IVAs don’t come with a guarantee of success – if you can stick to your side of the agreement, your IVA will succeed. But if you can’t, and your IVA fails, you would have to consider alternative ways of tackling your debts – for example, entering a debt management plan or declaring yourself bankrupt.