Is an IVA a good idea? The pros and cons

Is an IVA a good idea?

An IVA is a good idea only if you can afford a steady monthly payment for five to six years; if you cannot, a debt relief order, bankruptcy or an informal plan may suit you better (Key facts (opens in a new tab)).

This page sets out both sides as general information. Whether an IVA fits you depends on your own income, debts and assets, which is why your practitioner must explain every option, with its advantages, disadvantages and costs, before you decide. For the process itself, read how an IVA works.

What are the advantages of an IVA?

The main advantages of an IVA are one affordable monthly payment, protection from the creditors bound by it, no requirement to sell your home in a protocol IVA, and release from the included unsecured debts on completion (standard terms (opens in a new tab)).

The home point applies to protocol IVAs proposed from 1 July 2025. Each advantage depends on the IVA being approved and kept up.

• Creditors who voted against the IVA are bound by it as well (section 260 (opens in a new tab)).
• The creditors it covers stop asking you for payment once it starts, although they may still send statements, and interest and charges on those debts are frozen while it runs.
• You make one payment a month, set from a budget for your whole household that has to be sustainable for the whole IVA (IVA Protocol 2025 (opens in a new tab)).
• In a protocol IVA you do not have to sell your home or release equity from it.
• When it is completed, you are released from the debts it covers (standard terms (opens in a new tab)).
• GOV.UK says an IVA can give you more control of your assets than bankruptcy (opens in a new tab), and you may be able to keep a business running.

What are the disadvantages of an IVA?

The main disadvantages of an IVA are a five to six year commitment, fees taken from your payments, a six-year credit file entry, a public register entry and the risk of failure if your circumstances change (Key facts (opens in a new tab)).

An IVA affects you most through a five to six year payment commitment and a six-year credit file entry; a protocol IVA proposed from 1 July 2025 does not require you to sell your home, your partner's credit file is only linked to yours through joint credit (ICO (opens in a new tab)), and whether your job is affected depends on your role (see will an IVA affect my job).

• Fees come out of your payments first, so your creditors receive a smaller share in the early months (Key facts (opens in a new tab)).
• The IVA stays on your credit file for 6 years from the date it starts, which may make it difficult to borrow.
• It is listed on the Individual Insolvency Register, which anyone can search, until 3 months after it ends (GOV.UK (opens in a new tab)).
• You pay for 60 months, or 72 if your share of the equity in your home is £10,000 or more.
• If your disposable income rises, your payment goes up by half of the increase after the annual review (standard terms (opens in a new tab)).
• An inheritance, windfall or other asset worth more than £500 that you receive during the IVA can be claimed for your creditors.
• Anyone who shares a debt with you can still be chased for all of it.
• If the IVA fails, your creditors can chase you again, with the interest and charges that were frozen, and your supervisor or a creditor can ask the court to make you bankrupt (section 264 (opens in a new tab)).
• If you cancel, you get no refund of what you have already paid.

Is an IVA worse than a CCJ?

An IVA and a county court judgment do different jobs: a CCJ is a court's formal decision that you owe a debt, while an IVA is an agreement that deals with several debts at once and binds the creditors it covers.

A judgment's record is kept for 6 years unless you pay the full amount within a month, and a creditor can take you back to court to make you pay (GOV.UK (opens in a new tab)). An IVA stays on your credit file for 6 years from the start and on the public register while it runs. In return, the creditors it covers cannot take action against you for those debts while it lasts (standard terms (opens in a new tab)).

Both make borrowing harder for years. Which weighs more for you depends on how many debts you have and whether you can repay them, so your practitioner should compare the two with your own figures.

What can you not do in an IVA?

In a protocol IVA you cannot take on credit of more than £500 without your supervisor's written approval, and you cannot sell, charge or otherwise dispose of an asset the IVA covers without the supervisor's written consent (standard terms (opens in a new tab)).

The standard terms also set out what you must tell your supervisor and when:

• Tell your supervisor as soon as you reasonably can about a rise in income or any money or property you receive.
• Disclose overtime, a bonus or commission worth more than 10% of your normal take-home pay within 14 days, and pay in half of the amount above that 10%.
• Take part in the annual review of your income and outgoings. Not taking part can end the IVA.
• Tell your supervisor within 14 days if you are given notice of redundancy. Redundancy pay above 6 months of your net take-home pay goes into the IVA.
• Send HMRC the tax returns and payments that fall due after the IVA is approved, on time.

Is there a better option than an IVA?

The alternatives to an IVA in England and Wales are a debt management plan, a debt relief order, bankruptcy and informal arrangements with your creditors, and which is better depends on your income, assets and total debt.

A debt management plan (opens in a new tab) is an agreement to repay your debts, arranged yourself or through an FCA-authorised company, and creditors do not have to agree to it. A debt relief order (opens in a new tab) is for people who owe less than £50,000, have little spare income and do not own their home. Bankruptcy (opens in a new tab) costs £680 to apply for online. Informal arrangements with your creditors have a page of their own. The IVA Protocol 2025 (opens in a new tab) adds that a protocol IVA is unlikely to suit you if you qualify for a debt relief order, or if a debt management plan would clear your debts over a similar period and pay your creditors significantly more.

Each comes with different costs, lengths and risks. Compare them in every debt option compared, or see the two formal options side by side in IVA or bankruptcy.

Our licensed insolvency practitioners can act in an IVA and advise you on bankruptcy. We cannot set up a debt relief order or a debt management plan. For those, or for a second opinion before you decide, independent advice costs nothing.