An Individual Voluntary Arrangement (IVA) is one way to bring order to personal financial chaos. It’s a formal, legally binding agreement between you and your creditors, overseen by a licensed insolvency practitioner. The goal is simple: to make debt repayments affordable and give you a clear path to becoming debt-free.
If you’re running a company and juggling personal debt at the same time, it can feel like the walls are closing in. Credit cards, loans and tax bills don’t stop just because your business is under pressure. And when creditors start chasing, the stress can quickly become overwhelming. This is where an IVA could come in.
How does an IVA work?
An IVA is a legal agreement between you and creditors that allows you to repay personal debts more manageably. Over a fixed period (often three to six years) you make one affordable monthly repayment, based on what you can reasonably afford after essential living costs. This payment is distributed fairly among your creditors.
Once the IVA is complete, any remaining unsecured debts included in the arrangement are written off. That means you can draw a line under the past and move forward without legacy debts hanging over you.
Importantly, the IVA is legally binding. Once creditors agree, they can’t chase you individually or take separate enforcement action, if you keep to the terms of the Individual Voluntary Arrangement.
Who can use an IVA?
Individual Voluntary Arrangements are designed for individuals with personal debt or sole traders and partnerships who aren’t protected by a limited company structure. IVAs are most suitable for people with:
- A significant amount of unsecured personal debt
- Multiple creditors they can’t manage individually
- A steady income that allows for monthly contributions
- Assets such as a home or car they want to protect from bankruptcy
For directors, an IVA can be particularly relevant if personal debts have built up alongside company struggles. For example, using credit cards to support cash flow, or taking out loans in your own name to cover business costs.
Which debts can an IVA cover?
An IVA can include most types of unsecured debt, such as:
- Credit cards and personal loans
- Overdrafts
- Store cards and catalogues
- Tax debts owed to HMRC
- A Bounce Back Loan, if the loan relates to trading as a sole trader
It can’t include secured debts like mortgages or hire purchase agreements. You’ll need to keep paying those separately.
How does creditor approval work?
For an IVA to go ahead, 75% (by value) of voting creditors must agree to the proposal. Once approved, all creditors are bound to it — even those who voted against it.
HMRC is often a major creditor in Individual Voluntary Arrangements. They will usually support an arrangement if the proposal is realistic and transparent. Having a licensed insolvency practitioner prepare and negotiate your IVA increases the chances of creditor approval significantly.
Benefits of an IVA
An IVA can offer major relief if you’re struggling with unmanageable debt:
Protection from creditors – once approved, they can’t take legal action against you for included debts
One affordable payment – you only pay what you can realistically afford
Debt write-off – remaining unsecured debt is written off at the end
Keep your assets – unlike Bankruptcy, you can usually keep your home and car as long as you maintain payments
Clarity and certainty – you’ll have a fixed timeframe to becoming debt-free
The difference between preferential and fraudulent trading
It’s important to note that preferential transactions are not the same as fraudulent trading. With preferential transactions, the director might have acted out of loyalty or pressure, without intending to defraud creditors.
Fraudulent trading involves knowingly running the company to defraud creditors or for a fraudulent purpose.
The law treats fraudulent trading far more severely. But both can put directors at risk if not handled correctly.
What happens if an IVA fails?
If you can’t keep up with payments and the Individual Voluntary Arrangement fails, creditors can resume recovery action. In many cases, this leads to Bankruptcy.
That’s why it’s crucial to set a realistic monthly payment at the start, based on your actual disposable income. Our insolvency practitioners will help ensure your IVA proposal is something you can stick to, rather than an optimistic guess that might collapse later.
What does an IVA mean for directors?
If you’re a company director, entering into an IVA doesn’t automatically disqualify you from running a company. Unlike Bankruptcy, which can carry restrictions, an IVA allows you to stay in control of your business.
That said, you may need to disclose the IVA to lenders, business partners or regulatory bodies depending on your industry. And your ability to access new personal credit will be limited while the IVA is active.
IVA vs Bankruptcy
Both are ways to deal with personal insolvency, but the outcomes are different:
IVA – lets you repay a portion of your debts, usually keep your home, and avoid the restrictions of Bankruptcy.
Bankruptcy – can be faster but may result in loss of assets and carries heavier restrictions for directors.
By seeking advice early, you’ll understand whether an Individual Voluntary Arrangement, Bankruptcy or even another solution is right for you. Acting quickly also helps you protect your business, since personal financial problems can quickly spill into company affairs if ignored.
What happens at the end of an IVA?
Once the IVA is completed successfully, all remaining unsecured debts included in the arrangement are written off. You’ll receive a completion certificate, and creditors can’t chase you for any of those debts again. While your credit rating will need rebuilding, you’ll be debt-free—and with your assets intact.
We’re here to help with your IVA
We know how stressful it is to face personal debt on top of business challenges. We’ll walk you through your options, explain exactly what an Individual Voluntary Arrangement would mean for you, and help you decide whether it’s the right solution.
You don’t have to face the pressure alone. Call us today for free, confidential advice and start taking control of your future.
