When you’re weighing up whether an IVA is the right debt solution for you, knowing how long you’ll be tied into the arrangement is really important. It affects everything from your monthly budget to when you can start rebuilding your credit rating.
The duration of your IVA isn’t set in stone. Your circumstances, the type of payments you make, and what happens along the way can all influence how long your arrangement runs. Some people finish earlier than expected, whilst others might need a bit longer to complete their IVA.
How long does an IVA last?
Most IVAs run for five to six years. During this time, you’ll make monthly payments to your Insolvency Practitioner, who then distributes the money to your creditors according to the terms agreed in your IVA proposal.
The five to six-year term has become standard because it gives you enough time to make realistic payments without stretching yourself too thin, whilst also making sure creditors get a reasonable return. It’s long enough to make a meaningful dent in what you owe, but not so long that you’re stuck in the arrangement indefinitely.
Your IVA proposal – the formal document your Insolvency Practitioner prepares and sends to your creditors – will state exactly how long your arrangement is expected to last. Once your creditors approve this at the decision procedure, that becomes your target completion date.
After you’ve made all your agreed payments and met the other terms of your IVA, any remaining qualifying debt is written off**.
Can you choose how long an IVA lasts?
You don’t get to pick your IVA term like choosing a mobile phone contract. The duration is calculated based on what you can afford to pay each month and the total amount of outstanding debt you owe.
Your Insolvency Practitioner will look at your income and essential expenses to calculate your disposable income – what’s left over after you’ve covered rent, bills, food, and other necessities. This becomes your monthly IVA payment, and the length depends on whether you own £10,000 or more equity in a property. If you don’t own a property, or your share is less than £10,000, then your IVA will be for 5 years. If you do own a share of more than £10,000, then the IVA will be for 6 years.
This is subject to creditor approval. Creditors may request that the arrangement be extended; however, this is rare, and it is unlikely they would extend it past 6 years.
What affects how long IVAs will last?
Your Monthly Payment Amount
If the amount you can afford to pay reduces, the Supervisor can agree to reduce your payments by up to 20%. If payments need to be reduced by more than 20%, the Supervisor will need to seek creditor approval, and they may request an extension of up to 12 months to agree to the reduction.
If the amount you can afford to pay increases, then your payments will increase. You will still be required to pay for the 5 to 6 years that were initially agreed, and creditors will receive more money. If you end up paying sufficient funds to pay creditors in full, plus the fees of the IVA, then the IVA will come to an early conclusion.
Changes to Your Income
If your income goes up during the arrangement (through a pay rise, promotion, or taking on extra work), you’ll need to pay more each month. This can sometimes mean you complete earlier if you pay your creditors in full. If your income drops, your payments might need to be reduced, which could extend your term.
Property Equity
If you own property, and your share of the property is less than £10,000, then the IVA will be for 5 years. If it is more than £10,000, then the IVA will be for 6 years.
Lump Sum Payments
If you receive a windfall during your IVA – like an inheritance, tax rebate, or bonus – anything over £500 typically needs to be paid into the arrangement. A substantial lump sum might mean you can settle your IVA early, if it is enough to pay creditors in full, plus the fees of the IVA.
Payment Breaks
Life happens. If you need to take a payment break because of illness, unemployment, or other financial difficulties, your IVA term will usually be extended by the number of months you missed. The Supervisor can grant a payment break of up to 9 months, and if more is required, creditors can be asked to authorise a further payment break; however, this is subject to their approval.
Can my IVA be extended?
Your IVA can be extended, though there are specific circumstances that lead to extensions, and they need to be properly agreed upon.
- Missing payments – If you’ve had to take payment breaks during your IVA, the missed months are typically added onto the end of your term. Miss three months of payments, and your completion date shifts back by three months.
- Reduced payments – If your income has dropped significantly, and you need to reduce your payments by more than 20%, then your Supervisor will need to ask creditors for their permission to reduce the monthly payment. Creditors may ask for the IVA to be extended in exchange for reducing payments.
- Failed payment arrangements – If you consistently struggle to maintain payments and modifications are needed, creditors might agree to extend the term rather than let the IVA fail.
Apart from the 9 months’ payment break, any extension needs to be agreed through a formal variation to your IVA. Your Insolvency Practitioner can’t just add months onto your arrangement – creditors need to approve changes to the original terms.
Can you shorten your Individual Voluntary Arrangement?
Whilst extensions are fairly common, shortening your IVA is less straightforward but definitely possible in certain situations.
The main way to complete your IVA early is through a full and final settlement – when you (or someone on your behalf) can pay a lump sum that creditors will accept. For example, if you’ve been in your IVA for three years with three years remaining, a family member might offer a lump sum to settle everything now. Your Insolvency Practitioner would present this to your creditors for approval.
You can’t just make extra voluntary payments on top of your agreed monthly amount and expect to finish early. IVAs don’t work like mortgages, where overpayments directly reduce the term. If your position has improved after the IVA is approved, and you can afford to pay more, creditors expect you to increase your contributions to increase the amount they receive through the IVA.
Can I finish my IVA early?
Finishing your IVA early usually means settling it with a lump sum payment. This is sometimes referred to as an early settlement or a full and final settlement.
Scenarios where early completion might happen:
- Windfall payments: If you receive a substantial windfall during your IVA (inheritance, redundancy payment, compensation claim, lottery win), you’re required to declare it. Windfalls over £500 typically need to be included in your IVA. If the amount is large enough, your IVA can be settled early, either by paying the debt in full or through creditors accepting the lump sum in full and final settlement.
- Third-party offers: Sometimes a family member or friend offers to pay a lump sum to clear your IVA. This should be a genuine gift, rather than a loan. Your Insolvency Practitioner will present the offer to creditors, who’ll decide whether to accept it.
- Property sale: If you sell your property, you are not required to introduce the funds; however, creditors may accept the funds in full and final settlement of the IVA.
- Early settlement loans: After typically three years in your IVA, some lenders offer specialist IVA settlement loans. You could repay the loan instead, potentially at a lower monthly cost. However, this isn’t suitable for everyone and needs careful consideration.
Creditors need to agree to any early settlement – they’re not obligated to accept less than they’d receive from your full-term monthly payments. Your Insolvency Practitioner will negotiate on your behalf. If approved, you’ll receive your completion certificate once the Supervisor has finalised their administration and paid the funds to creditors.
How long will an IVA affect my credit rating?
Your IVA will appear on your credit file for six years from the date it starts, regardless of how long the arrangement actually lasts. Complete your IVA in five years, and it’ll remain on your credit report for one more year. Finish early after three years, and it’ll still appear on your credit report for six years from when you started.
The six years is fixed by credit reference agencies and starts from the date your IVA is approved by creditors, not from when you first apply for an IVA or complete the arrangement. Your details will also be listed on the Individual Insolvency Register during your IVA.
What will happen while my IVA is on my credit file?
- Most mainstream lenders won’t approve applications for credit cards, personal loans, or mortgages
- Mobile phone contracts on credit terms may be more difficult to get
- Specialist lenders may consider applications, but typically charge much higher interest rates
- Your IVA terms restrict you from taking on credit over £500 without your Insolvency Practitioner’s permission
How to Rebuild Your Credit Score After an IVA
Once your IVA is removed from your credit file, your credit score should start to improve.
You’ll need to actively rebuild your credit by:
- Registering on the electoral roll at your current address
- Making sure all bills and any existing credit commitments are paid on time
- Using a credit-building card responsibly (once your IVA is complete)
- Keeping credit utilisation low
- Avoiding multiple credit applications in a short period
Some lenders may still ask about past financial difficulties on application forms even after your IVA has been removed from your credit file. You’ll need to be honest about your history, though how far back they look varies between lenders.
The good news is that time does heal credit scores. Many people who complete an IVA successfully go on to get mortgages, car finance, and other forms of credit within a few years of their IVA ending – it just takes patience and responsible debt management.
