How Long Does an IVA Last and What Changes the Duration?

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement designed to help individuals in the United Kingdom manage and repay their unsecured debts. It serves as an alternative to bankruptcy, allowing a person to make affordable payments to creditors over a set period. This structured debt solution aims to provide a clear path to becoming debt-free by agreeing on a repayment plan that is both feasible for the debtor and acceptable to the creditors. It offers protection from creditor actions, such as continued contact or legal proceedings, once the agreement is approved.

The Standard IVA Term

An Individual Voluntary Arrangement typically lasts for a period of five or six years. This duration is generally established at the outset of the agreement, forming the basis of the repayment plan between the individual and their creditors. The most common term for an IVA is five years, equating to 60 monthly payments.

In some cases, the standard term may be set at six years from the beginning, particularly if there are considerations such as property ownership or specific creditor requirements. This timeframe allows for consistent contributions towards outstanding debts based on an individual’s financial capacity. The insolvency practitioner, who supervises the IVA, works to establish this initial period based on a thorough assessment of the debtor’s income, expenditure, and overall financial situation.

Factors Influencing IVA Duration

The duration of an Individual Voluntary Arrangement, while typically set at five or six years, can be influenced by various circumstances that may lead to its extension or early completion. Understanding these elements is important for anyone considering or currently in an IVA.

Payment Breaks

One common reason for an IVA to extend beyond its initial term is the use of payment breaks, sometimes referred to as “payment holidays.” If an individual faces a temporary financial difficulty, such as an unexpected expense or a short-term reduction in income, their insolvency practitioner may agree to a temporary suspension of monthly payments. These missed payments are generally added to the end of the IVA term, effectively extending its duration by the number of months a break was taken. Typically, a payment break can last for a single month or multiple months, with some agreements allowing for up to nine months in total over the IVA’s lifetime.

Equity Release

Equity release from a property can also affect an IVA’s length, particularly for homeowners. Historically, IVAs often included a clause requiring the debtor to attempt to release equity from their home, usually in the fifth or sixth year, to make a lump sum payment to creditors. If a remortgage or secured loan for equity release was not feasible, or if the process was delayed, the IVA term might be extended to six years as an alternative contribution. Recent changes, such as the IVA Protocol 2025, indicate that for new IVAs, if a debtor’s share of equity is £10,000 or more, the IVA term may simply be extended to six years (72 months) instead of requiring equity release. This adjustment aims to simplify the process and reduce the burden on homeowners, while still ensuring a fair contribution to creditors.

Early Settlement

Conversely, an IVA can conclude earlier than planned through an early settlement or a full and final offer. This occurs if a lump sum payment is made to creditors, which is typically less than the total remaining payments under the original agreement. Funds for an early settlement might come from an inheritance, a gift from a family member, or other unexpected financial windfalls. The insolvency practitioner would present this offer to creditors, and if 75% (by value) of those who vote agree, the IVA can be settled and closed early.

Failure to Meet Terms

While not a positive way for an IVA to end, failure to meet its terms can also alter its duration by causing it to terminate. If an individual repeatedly misses payments, provides inaccurate information, or fails to comply with other agreed-upon conditions, the insolvency practitioner may issue a notice of breach. If the breach is not rectified, the IVA can fail, leading to its termination. In such cases, the individual becomes liable for the outstanding original debts, and creditors may pursue alternative legal actions, including bankruptcy.

Changes in Financial Circumstances

Changes in financial circumstances, such as an increase or decrease in income, are subject to regular reviews by the insolvency practitioner. If an individual’s income increases significantly, they may be required to pay a higher monthly contribution into the IVA. While these adjustments affect the payment amount, they typically do not alter the overall duration of the IVA unless a specific agreement, such as a payment holiday, is implemented. The arrangement is designed to be flexible enough to accommodate minor fluctuations while maintaining the agreed-upon term.

What Happens When an IVA Ends

Upon the successful completion of an Individual Voluntary Arrangement, a structured process ensures that the individual’s financial standing is officially recognized and updated. The insolvency practitioner, who has overseen the arrangement, conducts a final review to confirm that all agreed-upon payments have been made and the terms of the IVA proposal have been fulfilled. Once satisfied, the insolvency practitioner issues a Certificate of Completion to the individual. This certificate serves as official proof that the IVA has been successfully concluded.

A primary implication of a completed IVA is that any remaining unsecured debts included in the arrangement are legally written off. This means creditors cannot pursue these debts further, providing the individual with a fresh financial start.

The IVA’s presence on the Individual Insolvency Register is also addressed upon completion. This public register, maintained by the Insolvency Service, lists details of insolvency solutions. After the IVA concludes, the entry for the individual is typically removed from the Insolvency Register within three months of the completion certificate being issued. This removal signifies the formal end of the public record of the insolvency.

However, the impact on an individual’s credit file extends beyond the IVA’s completion. The IVA record generally remains on the credit file for a period of six years from the date the IVA was approved. Even if the IVA concludes earlier than the standard term, the entry will stay on the credit file for the full six years from its commencement date, though it will be marked as “completed” or “satisfied.” This extended period reflects the seriousness of the insolvency solution and can affect the ability to obtain new credit during that time.