The Advantages and Disadvantages of an IVA


The Advantages and Disadvantages of an IVAEvery year, thousands of people in the UK enter into an Individual Voluntary Arrangement (IVA) as a solution to their debt problems. An IVA is a formal solution, whereby an agreement is reached between an individual and their creditors for the repayment of either partial or full debts.

An Individual Voluntary Arrangement consists of regular repayments, made to an insolvency practitioner, who then splits the repayments omongst creditors. Although they are not technically mutually exclusive, IVAs are typically seen as an alternative to declaring bankruptcy.

However, when deciding upon a debt solution, it is important to understand the advantages and disadvantages, in order to ensure the solution suits your individual needs.

Advantages of an IVA

Protection of Assets
Generally speaking, IVAs are ideally suited to those who have large assets, such as expensive vehicles or property, which they want to protect. This is because, unlike with bankruptcy, these assets are not placed at direct risk under an IVA, and IVA proposals can sometimes exclude property entirely. As a result, you won’t usually be forced to sell your house.

Affordability and Security
With an IVA, the amount you pay is based on the amount that you are able to realistically afford. Once an agreement is reached, as long as repayments are met, there is no threat of further action from creditors.

Job Protection
Bankruptcy can have a huge impact upon a person’s career, often preventing them from taking jobs related to accountancy and law. Those who have been declared bankrupt are also prevented from joining the armed forces or police force, or from becoming the director of a company. In most cases, IVAs will not affect your job in this way.

Fewer Credit Restrictions
Despite being logged on your credit file for a period of six years, IVAs offer far fewer restrictions when it comes to accessing credit than bankruptcy.

Disadvantages of an IVA

Longer-Term Solution
Although an IVA can technically be any length, it will usually lock the debtor into monthly repayments over a period of several years, with five years being the most common time frame. By contrast, bankruptcy is usually discharged after a year.

Impact on Mortgage
People entering into an IVA will usually be free from the risk of losing their home, however, they will be expected to release a share of their equity and relinquish any endowment linked to their mortgage.

Linked to Income
While IVAs are affordable, they can be linked to income which makes it difficult for a person to improve their overall circumstances during the period of the IVA. Any improvements to income during the IVA period may lead to an increase in repayments and any bonuses or inheritance received must also be declared.

IVAs are recorded on the Personal Insolvency Register, which is available publicly.


An individual voluntary arrangement can be an incredibly useful means of solving debt problems and, for many people they may be the single best solution available. An IVA can help to protect your home and your career and is based on what you can realistically afford.

However, it is important to take note of the disadvantages and to understand that they are not a simple solution to problems. Serious consideration needs to be taken before entering into an IVA, as they are primarily an alternative to bankruptcy. For less serious debt problems, alternative options should be explored.

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