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Individual Voluntary Arrangements (IVAs)

An IVA is an alternative to bankruptcy that allows an individual to settle all of their unsecured debts, including contingent liabilities (debts not yet confirmed – such as a debt arising under a personal guarantee, indemnity or future lease commitment) by entering into a single legally binding agreement with creditors. 

In entering into an IVA it is expected that the return to creditors will be greater than that which they would get if the individual were made bankrupt.

The terms of the IVA proposal are entirely flexible and can be tailored to personal and business circumstances. For example, the proposal could exclude any personal or family debt in order to increase the return to trade creditors; or, on the basis that future trading can be shown to be profitable, provide relief from existing creditor pressure whilst allowing time for the rescue of the business. A director agreeing to an IVA, unlike in bankruptcy, would be able to remain in office.

Typically an IVA proposal is based upon contributions from surplus income (such as drawings or salary) over three to five years, the realisation of assets or third party funding.


  • Unlike bankruptcy, there are no statutory restrictions on staying in business or obtaining credit, although this may prove difficult to obtain.
  • An individual won't be forced to sell their home although they will usually be asked to make a contribution to the IVA from any equity in their property towards the end of the IVA.
  • Unlike bankruptcy, an IVA is not publicised in the local newspapers.
  • If you are registered for VAT there is no automatic deregistration and pre IVA refunds will be paid to the business (subject to Crown set off).
  • If creditors cannot be paid in full they may settle at a significantly reduced sum.
  • A single lump sum payment may be accepted by unsecured creditors to clear all debt.
  • As long as 75% in value of voting unsecured creditors accept the proposal it will be binding on all unsecured creditors.
  • Only a Licensed Insolvency Practitioner, who is strictly regulated, can act as Nominee or Supervisor of an IVA.
  • There are no professional disqualifications with an IVA.


  • An IVA is a legally binding agreement and has strict terms and lacks flexibility.
  • The period of an IVA is usually longer than bankruptcy. Typically IVA's last three to five years whereas with bankruptcy there is normally an automatic discharge after twelve months.
  • Failure to comply with the terms of the IVA will result in a bankruptcy petition.
  • The underlying set up cost of an IVA is high and is generally not suitable where amounts owed are less than £25,000.
  • The individual’s credit rating will be affected for six years.
  • Although an IVA is not advertised, details of individuals entering into an IVA are held on a central register which can be searched by third parties.

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