If you’re considering an Individual Voluntary Arrangement (IVA), understanding exactly how the process works can help you feel more prepared and confident about moving forward.
An IVA is a formal agreement between you and your creditors that lets you repay your debts through affordable monthly payments over a set period, usually 5-6 years.
There are different stages to the process, from your initial consultation through to completion. Your licensed Insolvency Practitioner will guide you through each one, helping you understand what’s needed and what happens next.
Is getting an Individual Voluntary Arrangement right for you?
Before starting the formal IVA process, it’s worth understanding whether an IVA is likely to be suitable for your circumstances. Whilst your Insolvency Practitioner will help you determine if an IVA is right for you, you might be eligible for an IVA if you:
- Owe at least £7,000 in unsecured debt
- Have debts with two or more creditors
- Have regular income (employment, self-employment, pension, or specific benefits)
- Can afford monthly payments after essential living costs
- Live in England, Wales, or Northern Ireland
An IVA works well when you’re juggling multiple debts that have become unmanageable, especially if you’re facing pressure from creditors or worried about legal action.
However, an IVA may not be suitable if your debt levels are very low, you have no regular income, or most of your debts are secured or priority debts like current council tax.
Step 1 – Initial Consultation and Assessment
The first step is to contact an IVA provider like NDH Financial for a no-obligation consultation. During this conversation, a debt consultant will review your financial situation in detail to work out whether setting up an IVA is the right debt solution for you.
You’ll discuss:
- Your income, expenses, assets, and debts.
- Your monthly earnings from all sources – employment, self-employment, benefits, or pension income.
- Your essential living costs, like rent or mortgage, utilities, food, travel, and any other regular expenses, you need to maintain a basic standard of living.
- All your debts – who you owe money to, how much you owe each creditor, and what types of debt they are.
- Any assets you own, like property, vehicles, or savings.
Based on this information, the consultant will work with you to calculate how much you could realistically afford to pay towards your debts each month. This is your disposable income – what’s left after you’ve covered all your essential expenses. If an IVA looks suitable, your case will be passed to a licensed Insolvency Practitioner who will handle the formal process.
There’s no pressure to proceed if you’re not comfortable, and if an IVA isn’t right for you, the consultant will explain why and signpost other solutions.
Step 2 – Gathering Documentation
Once you’ve decided to go ahead with your IVA application, you’ll need to provide various documents that evidence your financial circumstances. Your Insolvency Practitioner needs these to prepare your formal proposal.
The documents typically required include:
- Recent payslips (usually three months’ worth), or tax returns if you are self-employed
- Bank statements (typically three months for all accounts)
- Proof of identity and address
- A complete list of your debts with creditor names and account numbers
- Information about any assets you own (property, vehicles, savings)
The quicker you can provide these documents, the faster the process moves forward. Most IVA providers accept scanned copies or photos sent by email, which speeds things up considerably compared to posting physical documents.
Make sure everything is complete and legible before you send it. Missing pages or unclear scans will need to be resubmitted, which just adds time to the process. If you’re unsure about what’s needed or whether a document is acceptable, ask your Insolvency Practitioner before sending it.
Keep copies of everything for your own records. You’ll want to refer back to these documents, and having your own copies means you can check details if any questions come up during the proposal stage.
Step 3 – IVA Proposal Preparation
Your Insolvency Practitioner will use the information and documents you’ve provided to prepare your formal IVA proposal. At this stage, they’re acting as the Nominee – the person responsible for working with you to put together your proposal and presenting it to your creditors.
The proposal is a detailed document that explains your financial situation to your creditors. It sets out:
- Why you can’t repay your debts in full
- What you’re offering to pay instead
- The terms of the arrangement.
Your Insolvency Practitioner will use the affordable monthly payment, which was previously calculated based on your income and essential living expenses, making sure you have enough left over to cover your basic needs.
The proposal will include a Statement of Affairs showing all your income, expenses, assets, and debts. It explains how much each creditor will receive and over what period. If there are any special circumstances – like needing to protect certain assets for work, or having irregular income if you’re self-employed – these will be addressed in the proposal. Your Insolvency Practitioner will ensure the proposal follows the IVA protocol required by law.
You’ll have the chance to review the proposal before it’s sent to your creditors, so this is your opportunity to check that everything is accurate and that you’re comfortable with the terms. Read it carefully – if anything seems wrong or unclear, ask your Insolvency Practitioner to explain or correct it. Don’t sign anything you don’t fully understand.
This stage typically takes about a week once all your documents have been received, though it may take longer if any information needs clarifying or if your situation is particularly complex.
Step 4 – Creditor Decision Procedure
Once you’ve signed the proposal, your Insolvency Practitioner will send it to all your creditors for approval. They’re given a minimum of 14 days to review the proposal and decide whether to accept it.
During this period, your creditors will look at your financial circumstances and consider whether the offer is fair and reasonable. They’ll compare what they’ll receive through the IVA against what they might get if you went bankrupt. Most creditors recognise that IVAs give them a better chance of recovering at least some of what you owe, rather than receiving nothing at all if your situation deteriorates further.
Your creditors vote on the proposal based on the amount you owe them, not the number of creditors. You need approval from creditors representing at least 75% of the total debt value who participate in the vote. This means that even if one or two creditors vote against it, your IVA can still be approved as long as enough other creditors agree.
Sometimes creditors request additional information or propose modifications to the proposal. They might want you to pay slightly more if they think you can afford it, or they might ask for clarification about certain aspects of your circumstances. If this happens, your Insolvency Practitioner will handle all the negotiations on your behalf. They’ll work with you to address any concerns whilst making sure the arrangement remains affordable for you.
If creditors do request modifications, you’ll need to agree to these changes before the IVA can proceed. Your Insolvency Practitioner will explain what’s being asked for and whether it’s reasonable. You’re not obliged to accept modifications that would make the IVA unaffordable or unrealistic, however, your IVA will not be able to proceed unless the modifications are agreed to.
Once 75% of creditors vote in favour, your IVA becomes legally binding on all your creditors – even those who voted against it or didn’t vote at all. This creditor decision procedure typically takes between three and six weeks from when the proposal is first sent out.
Step 5 – IVA Proposal is Accepted & Begins
Once your creditors approve the proposal, your IVA becomes a legally binding agreement. It begins on the date of the creditor decision, and from this point forward, your Insolvency Practitioner becomes the Supervisor of your IVA.
Several things happen immediately after approval:
- Your creditors can no longer chase you for payment – all contact from debt collectors and bailiffs must stop.
- They’re also prevented from taking any further legal action against you for the debts included in your IVA.
- Interest and charges on all your debts are frozen, which means the amount you owe stops growing.
Instead of dealing with multiple creditors, you now make one monthly payment to your Insolvency Practitioner. They’ll distribute this money to your creditors according to the terms agreed in your IVA. These payments are usually set up by standing order from your bank account, so they’re taken automatically each month on an agreed date.
Your Insolvency Practitioner will contact all your creditors to notify them that the IVA has been approved. This usually happens within a few days of approval, though it may take up to eight weeks for all creditors to update their systems. If any creditors contact you during this period, just let them know you have an approved IVA and provide them with your Insolvency Practitioner’s details. Creditors are legally required under the Consumer Credit Act to send you documents on an annual basis to confirm your debts remain outstanding and are in default; however, you can just retain these for your records.
You’ll receive confirmation of your IVA approval and details about your first payment. Your Insolvency Practitioner and their team become your primary point of contact throughout the arrangement. If your circumstances change or you have any questions, they’re the person to speak to.
Step 6 – During Your IVA (Years 1-5/6)
Your IVA will typically last for five or six years, during which time you’ll need to stick to the terms of the agreement. Your main responsibility is making your monthly IVA payments on time, every month. These payments are based on what you can afford, so they should be manageable alongside your essential living expenses.
Each year, you’ll have an annual review with your Insolvency Practitioner. They’ll ask you to complete an income and expenditure form showing your current financial situation. This review makes sure your payment amount is still appropriate based on your circumstances. If your income has increased significantly, you may need to pay more. If it’s decreased, your payment might be reduced. The aim is always to keep your IVA affordable whilst making sure you’re paying what you reasonably can.
You’ll need to report any significant changes in your circumstances during your IVA. This includes:
- Changes to your employment or income
- Moving house
- Receiving windfalls like inheritance or bonuses
- Changes to your household situation.
Being open about these changes helps your Insolvency Practitioner manage your IVA properly and avoid any issues down the line.
There are also two restrictions you’ll need to follow during your IVA:
- You can’t take on any new credit over £500 without your Supervisor’s permission.
- If you receive any windfalls or unexpected income over £500, these must be paid into your IVA.
Your Insolvency Practitioner will send you annual statements showing how much you’ve paid and how your IVA is progressing. If you’re struggling to maintain payments or your circumstances have changed unexpectedly, contact them straight away. They can discuss options like payment holidays, reductions, or modifications to help you deal with your debts and keep your IVA on track.
Step 7 – Completing Your IVA
As you approach the end of your IVA term, there are a few final matters to address. You will need to make sure you submit your final set of income and expenditure documentation so the Insolvency Practitioner can complete the final income and expenditure review.
You’ll need to make sure all your obligations under the IVA have been met. This means:
- All monthly repayments have been made
- Any agreed equity release has been attempted
- You’ve complied with all the terms of your arrangement throughout the period
Some people choose to end their IVA earlier by offering a lump sum to creditors. If you are in a position to do so, you should contact your Insolvency Practitioner, who will talk you through the steps required. If the lump sum is large enough, the Insolvency Practitioner may be able to accept the funds and complete the arrangement early; however, in most cases, creditors will need to accept the lump sum in settlement of the IVA.
Once your Insolvency Practitioner confirms that you’ve fulfilled all the requirements, they’ll make a final distribution of funds to your creditors. You’ll then receive a Certificate of Completion, which is your official confirmation that you successfully managed to get an individual voluntary arrangement completed.
After your IVA ends, any remaining qualifying unsecured debt is legally written off**. Your creditors can’t chase you for these debts anymore – they’re gone for good. Your details will be removed from the Individual Insolvency Register three months after completion, though the IVA will remain on your credit file for six years from the start date. If you have any questions about your credit report, you should contact a credit reference agency to discuss this, as your Insolvency Practitioner is unable to make any changes to your credit report.
Completing your IVA successfully means you’re now free from those debts and can start rebuilding your financial future. A lot of people find that having gone through the process, they’re much better at managing their money and staying on top of their finances.
