Pros and cons of an IVA

The honest answer is that an IVA suits some people well and is the wrong choice for many others. The benefits are real, but so are the costs, and they fall on you if it does not work out. Here is each side in full.

What are the advantages of an IVA?

• One monthly payment you can afford. Your payment is based on a household budget using the Standard Financial Statement, and must be sustainable for the whole term without causing hardship.
• Interest and charges are frozen on the debts included, so balances stop growing.
• Legal protection from creditors bound by it. Once approved, those creditors cannot take further action to recover the included debts.
• It binds creditors who voted against it. If creditors holding 75% of the debt, by value, of those who vote approve it, the rest are bound too.
• You are not asked to sell your home. Under the IVA Protocol 2025, a protocol IVA will not require you to sell or release equity from your family home.
• A fixed end date. A standard IVA lasts 60 months, or 72 months if your share of home equity is £10,000 or more.
• What is left is written off. When you complete it, you are released from the rest of the debts included. How much that is depends on what you can afford and what creditors accept, and it is not guaranteed.
• Some flexibility. Your supervisor can agree payment breaks of up to 9 months in total, and cut your payment by no more than 20% in total without asking creditors.
• Fewer restrictions than bankruptcy. Nobody takes control of your assets, and an IVA does not by law stop you being a company director.

What are the disadvantages of an IVA?

• Fees. There is no legal cap. Citizens Advice says IVA fees are around £5,000 on average, and your early payments go mostly on fees. See how much an IVA costs.
• A long, tight budget. Five or six years living on a budget set by spending guidelines, with little room for anything unexpected.
• Your payment can go up. At each annual review, your payment rises by 50% of any increase in your spare income.
• Extra money goes in. Overtime or bonuses above 10% of your normal take-home pay, redundancy pay above 6 months’ net pay, and windfalls or inheritances over £500 can all go towards the IVA (though windfalls only up to what is needed to repay creditors in full plus costs).
• Your credit file. The IVA stays on it for 6 years from the start date, which makes borrowing harder and more expensive. See how an IVA affects your credit rating.
• It is public. Your IVA is on the Individual Insolvency Register, which anyone can search, until about 3 months after it ends.
• No borrowing over £500 without your supervisor’s written permission.
• An extra year for many homeowners, if your share of the equity is £10,000 or more.
• It might not be approved. Creditors vote, and they do not have to agree.
• Not every debt is covered. Student loans, magistrates’ court fines and child support arrears, among others, are not included, and secured debts such as your mortgage are outside it. A partner on a joint debt stays liable for the whole amount.
• The risk of failure. If it ends early without completing, you can be left owing more than when you started. More on that below.

The pros and cons at a glance

Why do IVAs fail, and could yours?

This is the downside people underestimate. Insolvency Service figures show:

• 6.0% of IVAs registered in 2024 were terminated within a year
• 13.2% of IVAs registered in 2023 were terminated within two years
• 21.0% of IVAs registered in 2022 were terminated within three years
• about one in three (34%) IVAs registered between 2016 and 2018 were terminated at some point

When an IVA fails, the supervisor issues a certificate of termination. Creditors can then pursue the full outstanding balances, including interest and charges that were frozen during the IVA, and the supervisor or any creditor can ask a court to make you bankrupt.

Why do they fail? The Insolvency Service’s own research points to problems at the very start. In 2024, Insolvency Service research on 310 IVAs that ended in termination found that 60% showed evidence of poor practice in the early stages, such as inaccurate income and spending figures or other debt solutions being wrongly dismissed. And over five or six years, life changes: job loss, illness or a relationship ending can all make payments harder to keep up.

The lesson is simple: an IVA is only as sound as the budget behind it. See what happens if an IVA fails.

How does an IVA compare with the alternatives?

A debt relief order is for people with debts under £50,000, less than £75 a month spare and assets under £2,000. For side-by-side detail, see IVA or bankruptcy?, IVA or debt management plan? and IVA or debt relief order?.

What to do next

1. Get free, impartial advice from MoneyHelper, StepChange, Citizens Advice or National Debtline before you decide anything. They can weigh these pros and cons against your own numbers. See where to get free debt advice.
2. If an IVA is still on the table, ask any insolvency practitioner for the key facts document and the fee schedule, and check the budget line by line.
3. Read the rest of our guides on the IVAs explained page, including who qualifies.