How does an IVA work?
An insolvency practitioner works out what you can afford, your creditors vote on a proposal, and if it is approved you pay that amount for a set term, usually 5 or 6 years. What is left of the included debts is written off when you finish.
There are three parties: you, your creditors, and a licensed insolvency practitioner (IP). The IP acts first as your “nominee”, helping to prepare the proposal and putting it to creditors, and then, if it is approved, as your “supervisor”, collecting your payments and running the arrangement under a set of standard terms.
Step by step: from first call to completion
| Stage | What happens |
|---|---|
| 1. Assessment | The IP looks at your income, spending, debts and assets, runs a credit history search and checks your figures. They should explain every option open to you, not just an IVA. |
| 2. Key facts and proposal | You get a key facts document before signing anything. You then sign a proposal and a statement of your affairs. |
| 3. Nominee’s report | Within 14 days of receiving your proposal, the nominee reports to your creditors on whether it has a reasonable prospect of being approved and carried out. |
| 4. Creditors decide | Creditors get at least 14 days’ notice and vote, usually electronically or by post. |
| 5. The IVA starts | If approved, it binds all your unsecured creditors who were entitled to vote, and is entered on the public Individual Insolvency Register. |
| 6. Payments and reviews | You pay the supervisor each month. Your income and spending are reviewed each year. |
| 7. Completion | When everything is paid and done, you get a completion certificate within 28 days and are released from the debts included. |
Our guide to applying for an IVA goes through the first four stages in more detail.
How the creditor vote works
The proposal is approved if creditors holding at least 75% of the debt, by value, of those who vote say yes. It fails if more than half, by value, of the creditors who are not connected to you vote against. It is not one vote per creditor, and creditors who do not vote are not counted either way. Normally no court is involved and you do not attend anything. Creditors can ask for changes to the proposal, but they cannot approve a changed version unless you agree to each change.
How is your monthly payment worked out?
The IVA Protocol 2025 says your budget must be drawn up using the Standard Financial Statement, a set of spending guidelines run by the Money and Pensions Service and updated each April. It covers your whole household where appropriate, and the payment must be sustainable for the whole term without causing you hardship.
A few details that matter:
- reasonable pension contributions taken from your pay can carry on (additional voluntary contributions cannot)
- state benefits count as income, but if you get disability or carer’s benefits, the related costs must be included in your spending
- your mortgage or rent, council tax, energy, food, travel and other essentials come out first
For example, suppose your household take-home pay is £2,400 a month and your essential costs under the Standard Financial Statement come to £2,150. That leaves £250, which is the starting point for your IVA payment. (This is a hypothetical example, not a guide to what yours would be.)
Where does your money go?
Each payment goes to your supervisor, not to your creditors directly. The IP’s fees for setting up and running the IVA come out of it, and the rest is paid to creditors as “dividends”. The key facts document warns that your first monthly payments will usually cover more of the fees than your debts. Your proposal must include a schedule showing how the money is split between fees and creditors, year by year. See how much an IVA costs.
What happens to interest, charges and creditor contact?
Once the IVA is approved, interest and charges on the included debts are frozen, and creditors bound by it cannot take further action to recover those debts. They may still send you statements.
The protection has limits. Secured lenders, such as your mortgage lender, are not bound unless they agree, and debts that cannot be included (such as student loans or magistrates’ court fines) carry on as normal. If the IVA fails, creditors can claim the interest and charges that were frozen.
What happens to your home in an IVA?
Under the IVA Protocol 2025, which applies to protocol IVAs from 1 July 2025, you will not be asked to sell your home or release equity from it. Instead, your share of the equity decides how long the IVA lasts.
Equity is worked out as 85% of the property’s value, minus any mortgage or other secured borrowing. If your share of that is under £10,000, the IVA runs for 60 months. If it is £10,000 or more, it runs for 72 months instead. There is no further equity review once it has started. If you own jointly, only your own share counts.
For example, a home worth £200,000 with a £160,000 mortgage gives 85% of £200,000 (£170,000), minus £160,000, which is £10,000. A sole owner with that home would have a 72-month IVA. (Hypothetical figures.)
If your IVA was agreed before 1 July 2025 on the older 2021 Protocol terms, different rules apply: equity over £5,000 could mean a revaluation around month 54 and an attempt to remortgage, with an extra 12 months if that was not possible. Check your own terms. There is more in your home and belongings in an IVA.
What if your circumstances change?
The standard terms set out what happens when life changes. You must tell your supervisor about changes as soon as reasonably possible.
| If this happens | The standard rule |
|---|---|
| Your income rises | At each annual review, your payment goes up by 50% of any increase in spare income. |
| Overtime, bonus or commission over 10% of your normal take-home pay | Tell your supervisor within 14 days, and pay in 50% of the amount above that 10% within 14 days of telling them. |
| A windfall, gift or inheritance worth more than £500 | It can be claimed for the IVA, but only as much as is needed to repay creditors in full plus costs. |
| Redundancy | Tell your supervisor within 14 days. You can usually keep up to 6 months’ net take-home pay; anything above that goes into the IVA. |
| Your income falls | The supervisor can cut your payment by no more than 20% in total without asking creditors. Larger cuts need creditors to agree. |
| You cannot pay for a while | The supervisor can agree payment breaks of up to 9 months (39 weeks) in total. The IVA is extended by up to 12 months to make up the missed payments, unless you make them up another way. |
| You want to borrow | You cannot take credit over £500 without the supervisor’s written approval, apart from normal things like utilities and insurance. |
Falling three months’ payments behind without an agreed break or reduction counts as a breach. So does giving false or misleading information, or your debts turning out to be 25% or more higher than the figure in your proposal. The supervisor then gives you a month to put things right.
Want to know whether an IVA could work for you? Answer a few questions about your debts and income. It takes about 3 minutes, and it is free and confidential.
What happens at the end, or if it goes wrong?
If you make every payment and meet the other terms, your supervisor issues a completion certificate within 28 days, and you are released from the debts included. Your entry on the Individual Insolvency Register is removed about 3 months later. The IVA stays on your credit file for 6 years from the start date, even after you finish. See what happens at the end of an IVA.
If you breach the terms and do not put it right, the supervisor issues a certificate of termination. Creditors can then pursue the full balances again, plus the frozen interest and charges, and the supervisor or any creditor can ask the court to make you bankrupt. Only a court can make that decision. According to Insolvency Service figures, about one in three IVAs started between 2016 and 2018 ended this way. More on what happens if an IVA fails.
What to do next
- Talk it through with a free, impartial adviser first. MoneyHelper, StepChange, Citizens Advice and National Debtline can compare all your options: see where to get free debt advice.
- If you can afford regular payments, compare an IVA with a debt management plan, which is more flexible but not legally binding: IVA or debt management plan?.
- Work out an honest budget before anyone else does it for you. When the Insolvency Service looked at IVAs that later failed, it found inaccurate income and spending figures among the early problems. A payment you cannot keep up for five or six years helps nobody.
For the rest of our IVA guides, go to IVAs explained.
Common questions
How long does it take to set up an IVA?
There is no fixed timescale. Once the insolvency practitioner has your proposal they have 14 days to report to creditors, and creditors must get at least 14 days' notice of the decision date, so allow several weeks from your first conversation.
Do I have to go to a creditors' meeting?
Almost certainly not. Since April 2017 creditors usually decide by electronic vote or by post. A physical meeting is only held if enough creditors ask for one, and you would be told if that happened.
Can I choose which debts go into my IVA?
Not really. You must list all your creditors, and the IVA binds every unsecured creditor who was entitled to vote, including one that was missed off by mistake. Leaving a debt out on purpose, or giving misleading figures, can be treated as a breach.
Do I still pay my mortgage and rent during an IVA?
Yes. Mortgage, rent and other essential bills are part of your budget and you keep paying them yourself. The IVA payment is worked out from what is left after those costs.
Related guides
- How to apply for an IVA The application process from first advice to the creditor vote, and the questions to ask.
- How long does an IVA last? 5 or 6 years for most IVAs, what can extend or shorten one, and how long the records last.
- What happens if an IVA fails? How often IVAs fail, the breach process, what happens afterwards and the options that are left.
- What happens to your home and belongings in an IVA? The 2025 homeowner rules, the equity calculation, and your car, pension, savings and bank account.