Is An IVA Worth It?

Most people who enter an IVA have at least £6,000 of unsecured debt, often spread across multiple creditors. Technically, there’s no fixed minimum set in law, but most Insolvency Practitioners will only recommend an IVA if the amount you owe is large enough to make the process worthwhile for both you and your creditors.

If your debts are smaller, or if you only owe money to one creditor, then other solutions like a Debt Relief Order (DRO) or an informal Debt Management Plan (DMP) may be more suitable. An IVA is designed for people with significant debt levels who can make regular monthly contributions but would struggle to ever repay the full balance.

Not immediately. An IVA requires you to make affordable monthly payments over a period of five to six years. During this time, your creditors cannot add interest or charges. At the end of the arrangement, any debt that remains unpaid is legally written off.

For example, if you owe £30,000 but can only afford to repay £150 a month for 72 months, you might end up repaying around £10,800 in total. Once the IVA ends, the other £19,200 is cleared. The exact outcome depends on your circumstances, but in most cases, people repay only a portion of what they owe.

It is possible, but it won’t be immediate. An IVA stays on your credit file for six years from the date it begins, which makes getting a mortgage or other forms of credit more difficult during that period. Even after the IVA is removed from your file, lenders may still ask about your financial history and could offer you higher interest rates.

If you’re already a homeowner, you may also be required to attempt to release equity towards the end of your IVA. If you cannot remortgage, the IVA may simply be extended for an additional year instead. For first-time buyers, it’s usually best to wait until the IVA has fully completed and your credit profile has begun to recover before applying.

In most cases, your employer will not be notified about your IVA. Your IVA is a matter between you, your Insolvency Practitioner, and your creditors. However, there are exceptions. If you work in certain regulated professions, such as financial services, accountancy, or law, you may be required to declare the IVA as part of your professional obligations.

For the vast majority of jobs, an IVA won’t affect your employment, and your employer will only know if you choose to tell them. The IVA will appear on the public Insolvency Register, but this is not something employers typically check unless you’re in a regulated role.

Bankruptcy and IVAs both aim to deal with unmanageable debt, but they work differently and carry different consequences. Bankruptcy is often quicker, lasting around 12 months, but it can be much harsher: you may have to sell assets, including your home, and it can limit your career opportunities in some sectors.

An IVA, by contrast, is longer (five to six years) but allows you to protect your home and assets in most cases. It’s also less stigmatised than bankruptcy, and for many people with a steady income, it offers a more controlled way of becoming debt-free. Whether bankruptcy or an IVA is better depends entirely on your situation — homeowners, for example, often find an IVA is worth it because it helps them avoid losing their property.

Most unsecured debts can be included in an IVA. These typically include credit cards, overdrafts, personal loans, payday loans, store cards, and catalogue debts. Certain debts, however, cannot be included — such as student loans, child maintenance arrears, secured debts (like your mortgage), and some court fines.

It’s important to provide your Insolvency Practitioner with a full picture of your debts so they can advise you properly. Any debts not included in the IVA will still need to be repaid separately, so if the majority of your debt is ineligible, an IVA may not be worth it for you.