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What Is An Individual Voluntary Arrangement?

Last updated: September 29, 2021

The quick answer

An Individual Voluntary Arrangement is a legally binding restructuring of your debts into a manageable amount. Quite often it involves you paying back part of what you owe over a period of five years. It only applies to unsecured debt, which means it does not include mortgages on property.

In more detail

Individual Voluntary Arrangements (IVAs) have been around for over 20 years now. They can be used by people in business or private individuals to freeze their liabilities or debts. There are about 50,000 IVAs registered each year.

IVAs are typically used by someone who has built up unsecured debt that they cannot pay. A typical example of someone using an IVA in business is where the business has traded at a loss, but is now profitable or needs protection whilst it is sold so at least something can be paid back. Often the total liabilities exceed £20,000 and are on average £100,000, although there is no limit. We have carried out an IVA for £35 million of debt.

The IVA is a document called an IVA proposal. It contains:

  • A brief history of why the finances have gone wrong.
  • A cash flow projection for the future.
  • A snapshot of all of the assets and liabilities today.
  • A proposal to creditors to pay them back something.

Often the return to creditors is less than 100p in the £ so that creditors have to wait, freeze interest and don’t get all their money back. The alternative, however, is bankruptcy, so it is usually accepted by creditors.

A Licensed Insolvency Practitioner like us is needed for an Individual Voluntary Arrangement and they will help pull the proposal together and make a report to the Court that the IVA is a good idea. They will also call the meeting of creditors.

It is worth noting that 75% of creditors by value must approve the IVA. Only those that vote count towards that 75%. 

Sometimes creditors propose modifications or changes to the proposal. If they do, the debtor (person making the IVA proposal) must approve those modifications.


If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

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Author: David Kirk - ACA FABRP
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David Kirk

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