Debts an individual voluntary arrangement covers
An Individual Voluntary Arrangement (IVA) is a formal and legally-binding agreement between you and your creditors to pay back your debts over a period of time. An IVA must be set up by an insolvency practitioner.
An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider. Most debts can be paid off through an IVA but there are some exceptions.
Debts you can include
When you get an IVA you can include:
- personal loans
- credit cards
- gas and electric arrears
- Council Tax arrears
- water arrears
- payday loans
- store cards
- income tax and national insurance arrears
- tax credit or benefit overpayments
- debts to family and friends
- other outstanding bills, for example solicitor's costs, invoices for building work and vets bills
Mortgages, secured loans and rent
Secured loans are debts which are secured against your home. This means if you can’t pay the debt, they can take your home from you. You can include secured loans, mortgage or rent arrears in an IVA. However, your creditor will have to give their permission for it to be included and they are unlikely to do this.
Amount of debt that can be included
Any amount of debt can be included in an IVA. There are no minimum or maximum limits set by the law. The fees for an IVA are high so if your total debt is less than £10,000 an IVA might not be the best option. Find out more about other debt solutions.
Number of debts that can be included
Any number of debts can be included but normally an IVA will be suitable if you have more than one creditor.
IVA’s can be flexible. If you decide an IVA is right for you, your insolvency practitioner will advise you on whether your debts are suitable for an IVA.
Debts you can’t include
Debts you can’t include in an IVA are:
- maintenance arrears that have been ordered by a court
- child support arrears
- student loans
- magistrates' court fines
- Social Fund loans
- TV licence arrears
If you owe money to people or companies in the EU
An IVA might not be right for you if you owe money to people or businesses in the EU. These debts might not be covered by an IVA.
Your creditors could keep asking you for money, for example by calling you and sending you letters.
If you live in the EU, they could take you to court in the EU.
From 1 January 2021 EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020.
Get legal advice if you have creditors in the EU. Find free or affordable legal help.
What to do about debts you can’t include
If you have debts that can’t be included in the IVA, you'll have to deal with those separately so you need to make sure you have enough money to pay these debts before paying money into an IVA.
You might want to choose a solution that can deal with all of your debts together.
You might have some ‘joint debts’ which are owed by you and another person, such as a partner.
An IVA can only cover one person, so the other person will still be responsible for the whole of the debt. It may not be a good idea to include joint debts in the IVA.
You can't take out a joint IVA, but you and the other person might be able to take out individual IVAs that are connected - these are called ‘interlocking’ IVAs. Your insolvency practitioner will be able to advise you about this.
If you have a lot of joint debts and the other person doesn't want an IVA, you might need to take a different option.