The ad that keeps following you around social media says an IVA can wipe out a big chunk of what you owe. It says a lot less about year one, when most of your payments can go to the firm and almost none to the people you owe.
Short answer
Jump to: Where the money goes · The 3-step test · If it fails · Questions to ask · FAQ
Scotland uses a Protected Trust Deed instead, so this guide is for England and Wales. For all your options in one place, start with our complete guide to paying off debt.
Check the date on any IVA advice, including this page
The rules changed on 1 July 2025, when the Insolvency Service’s revised IVA protocol took effect for protocol IVAs. Under it your home no longer forms part of the IVA, so you are not made to release equity to pay for it. A lot of the IVA advice online is older than that and still says you will have to remortgage near the end. If a page tells you that, look at when it was written.
Two other changes matter. An IVA is flagged as unsuitable where you would qualify for a Debt Relief Order, and if an IVA is cancelled the practitioner must point you to free regulated debt advice. Some firms offer bespoke IVAs outside the protocol. Ask them to explain in writing how it differs.
Where the money goes: a £300 a month IVA, in pounds
Take £24,000 of card and loan debt and £300 a month spare after essentials. The Insolvency Service says IVA fees are taken from your monthly payments, not upfront, and that your first payments typically cover more of the fee than the debts. So here is the same IVA at five years and at six, using a £3,650 fee for both (our assumption, taken from the 2023 average).
| 5-year IVA (equity under £10,000) | 6-year IVA (equity £10,000+) | |
|---|---|---|
| You pay in total | £18,000 (60 × £300) | £21,600 (72 × £300) |
| Fee | £3,650 | £3,650 |
| Reaches creditors | £14,350 | £17,950 |
| Written off | £9,650 (40% of the debt) | £6,050 (25% of the debt) |
| Months to cover the fee, if it is taken first | About 12 | About 12 |
Look at the middle row. The longer IVA for homeowners with equity does not give you more write-off, it gives you less, because the extra year goes to creditors. Whether the fee really is taken first varies by firm. If it is, the first twelve payments or so do nothing for your balance. That is the number to ask about before you sign.
What doing nothing, paying more and an IVA each cost
| Route | Monthly | What happens |
|---|---|---|
| Keep paying £300 on the cards | £300 | Interest alone is about £480 a month, so the balance keeps growing: roughly £44,529 after 5 years |
| Pay £600 | £600 | Clear in 82 months with £24,766 of interest |
| Pay £800 | £800 | Clear in 47 months with £13,019 of interest |
| IVA (illustrative) | £300 | £18,000 over 60 months; about £9,650 written off if it completes |
Our calculation: interest charged monthly at 24% APR, no new spending. The IVA row assumes creditors accept and you finish.
The line to remember is the one that never clears. At 24%, a £300 payment only matches the interest on £15,000 (£300 ÷ 2% a month). At 18% the line is £20,000 and at 29.9% it is about £12,000. Below it you make progress. Above it you stand still.
| Card debt at 24%, paying £300 a month | Time to clear | Interest paid |
|---|---|---|
| £10,000 | 56 months | £6,644 |
| £12,000 | 82 months | £12,383 |
| £14,000 | 137 months | £27,026 |
| £15,000 or more | Never, interest is at least £300 | Growing |
So a £10,000 balance at £300 a month clears inside five years without an IVA, and you keep a clean credit file. Run your own balances through the minimum payment calculator before you let a firm do the sum for you.
Three questions to answer before you ask for an IVA quote
- Could you clear it yourself in five or six years? If your balance is under the never-clears line for your interest rate, or you could raise the payment, you may not need one.
- Do you qualify for a Debt Relief Order? GOV.UK lists the tests: you owe under £50,000, you have under £75 a month spare, under £2,000 of assets, no vehicle worth £4,000 or more, you have lived or worked in England and Wales in the last 3 years, and you have not had a DRO in the last 6 years. A DRO is free to get and the debts stop after 12 months. Our DRO and bankruptcy checker tests these and bankruptcy vs DRO explains the difference.
- Is your income steady for five years and do you have something to protect? The Insolvency Service says an IVA may not suit you if you have very low debts, can only afford a small payment, or your income is mainly benefits. The strongest case is a decent salary, large debts and assets you want to keep.
Two other routes to compare: a debt management plan is more flexible if your income or costs might change, and bankruptcy can be cheaper than people expect if you have little to lose (what it costs).
Stress-test the payment before you sign
Five or six years is a long time, and the people whose IVAs fail are rarely hit by one big event. Costs creep. Try this: take your monthly essentials, add 10%, and see what is left. If your essentials are £1,500, a 10% rise is £150. A £300 IVA payment that was comfortable becomes £150 of room, and a car repair or a rent rise uses that up in a month. If a 10% rise would break the plan, ask for a lower payment now, not a rescue later.
The rules for pay changes cut both ways. You have to tell the practitioner about a pay rise or an inheritance, and you may have to pay more in or pay some of the money in. If you are at risk of redundancy, you can usually keep up to six months’ redundancy pay and anything above that goes into the IVA. An annual review checks your income and spending each year.
If it fails: what it costs in pounds
Say you pay the £300 for twelve months and then lose your job. You have paid £3,600. If the £3,650 fee was taken first, almost none of it reached creditors. The IVA is cancelled, you get no refund, and the Insolvency Service says creditors can then chase you for the debts and claim the interest and charges that were frozen. You could be back near £24,000 or more owed, with a year of spare money gone. Even a failure at month 30 leaves creditors with only about £5,350 of the £9,000 you paid, because of the fees.
The way to avoid that is the stress test above and an honest word with the practitioner the first month you struggle. Options include reduced payments or a payment holiday (which extends the IVA). If creditors start chasing again, our guide to collector rights shows what they can and cannot do, and what happens if you stop paying covers the stages.
Credit file, public register and the timeline
| When | What happens |
|---|---|
| Day 1 | Creditors holding 75% of the debt by value have agreed. The IVA binds all of them, including any who voted no. Collection and interest stop. |
| Every year | Review of your income and spending; payments can go up or down |
| Year 5 or 6 | Last payment, then a certificate of completion. You no longer owe the included debts |
| 3 months after the end | Your name comes off the Individual Insolvency Register |
| 6 years from the start | It drops off your credit file. A 5-year IVA leaves one year on the file after it ends |
Whether you can have an IVA at all can depend on what is in it. Student loans, for example, stay outside, which we explain in can a student loan be included in a DRO or IVA. For the bigger picture of ways out of debt, read how to write off debt in the UK. If you are asking about the credit file after, see the credit score needed for a mortgage.
Ask any IVA firm these seven things, in writing
- What is the total fee in pounds, and when is it taken from my payments?
- Is this a protocol IVA? If not, how does it differ and why?
- Is it five years or six, and why?
- What happens if I need to reduce or pause payments?
- What share of your IVAs complete, and how many fail in the first three years?
- Did you check whether I qualify for a DRO or could use a debt management plan?
- Are you a licensed insolvency practitioner, and who regulates you?
A good firm answers these without pressure. Free advice from StepChange (0800 138 1111), MoneyHelper or National Debtline (0808 808 4000) costs nothing and commits you to nothing. In 2024 there were 64,050 IVAs registered in England and Wales, which is one reason the adverts are everywhere.
IVA questions people ask
What is an IVA?
An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and the people you owe. You pay an insolvency practitioner a set amount each month, usually for five or six years, and the included unsecured debt left at the end is written off. Interest is frozen and creditors stop chasing you.
How long does an IVA last?
Five years under the Insolvency Service’s 2025 protocol, or six years if you own your home with £10,000 or more of equity. Missed payments or a payment holiday can extend it.
What are the main pros and cons of an IVA?
The pros are frozen interest, one monthly payment, no collection calls and part of the debt written off if you finish. The cons are fees taken from your payments, six years on your credit file, a public register entry, and cancellation if you stop paying.
How much does an IVA cost?
There is usually a set-up fee and a handling fee on each payment, and the fees come out of your monthly payments rather than upfront. The Insolvency Service says your first payments typically cover more of the fee than of your debts. Our worked examples use £3,650, the average figure the Insolvency Service blog gave in 2023, so ask for your own figure in writing.
Does an IVA ruin your credit?
It stays on your credit file for six years from the day it starts, even if it ends early. That makes new credit and some rental applications harder.
Can I keep my house in an IVA?
Under the protocol that applies from 1 July 2025 you do not need to sell your home or release equity to pay for the IVA. If your equity is £10,000 or more the IVA runs for six years instead of five. Bespoke IVAs outside the protocol can differ, so get the terms in writing.
What happens if I miss IVA payments?
Speak to the practitioner at once. Options include reduced payments or a payment holiday, which extends the IVA. If it is cancelled, creditors can chase you again and claim the interest and charges that were frozen.
Is an IVA better than a DRO or bankruptcy?
Not automatically. A Debt Relief Order is for people who owe under £50,000 with under £75 a month spare, under £2,000 of assets and no home. If you qualify it usually costs less and asks less of you. An IVA suits steady income and assets you want to protect.
Can a student loan be included in an IVA?
No. Student loans stay outside the IVA and the deductions continue.
Is an IVA public?
Yes. It is on the Individual Insolvency Register and is removed three months after the IVA ends.
Will an IVA affect my partner?
An IVA covers only one person, so your partner’s own debts stay outside it. The exception is anything you owe together. A joint debt stays fully your partner’s responsibility, so if part of it is written off in your IVA, your partner still has to pay what is left. You cannot take out a joint IVA, though two people can sometimes run separate, linked ones. Get free advice before you include any joint debt.
How do I check an IVA company is legitimate?
An IVA has to be set up by a licensed insolvency practitioner, and you can check one on the Insolvency Service website. Free advice from StepChange or National Debtline should cost you nothing. Be wary of any firm that charges upfront, promises guaranteed approval, says all your debts will be written off, or pushes you to decide fast.
Insolvency Service, Key facts: Protocol IVAs (updated 1 April 2025)
Insolvency Service press release, 29 May 2025 (protocol from 1 July 2025; 64,050 IVAs in 2024)
GOV.UK: Individual Voluntary Arrangements
GOV.UK: Debt Relief Orders
The £3,650 average fee is from a 2023 Insolvency Service blog and may have changed. Calculations ours.
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