An IVA, or Individual Voluntary Arrangement, is a formal, legally binding agreement to repay creditors part of what is owed over a set period, usually five or six years. It is set up through a licensed insolvency practitioner and binds creditors who agree.
In one line: An IVA is a binding deal to repay part of your debts over several years through an insolvency practitioner.
How an IVA works
An insolvency practitioner proposes the arrangement to creditors based on what the person can afford. If creditors holding the required majority by debt value approve it, the IVA binds all of them.
Someone owing 24,000 GBP might pay a set monthly amount over five years, after which the remaining balance covered by the IVA is written off. Interest and charges are usually frozen while it runs.
An IVA appears on the public Individual Insolvency Register and on the credit file for six years, and missing the agreed payments can cause it to fail.
IVA vs bankruptcy vs DRO
An IVA repays part of the debt over time and is binding once approved. Bankruptcy is a different insolvency route, and a Debt Relief Order suits smaller debts with few assets and low income.
Unlike bankruptcy, an IVA can let someone keep assets such as a home while repaying, although it commits them to several years of structured payments.
Primary source: GOV.UK: Individual Voluntary Arrangements