Author: Jessica

Understanding the IVA Decision

An Individual Voluntary Arrangement (IVA) can be a life-changing solution for people struggling with unmanageable debt. But like all formal debt solutions, it comes with significant advantages and equally significant drawbacks. Understanding both sides in detail is essential before committing to a legally binding arrangement that will last five or six years.

This guide examines the IVA pros and cons honestly, without sugarcoating either side of the picture.

The Advantages of an IVA

1. Legal Protection from Creditors

Once an IVA is approved, it becomes legally binding on all your creditors — even those who voted against it. From that point, your creditors cannot add interest or charges to the included debts, cannot take legal action against you, cannot instruct bailiffs, and cannot contact you directly about the debts. All contact goes through your Insolvency Practitioner. The immediate relief from creditor pressure is one of the most significant practical benefits for people who have been dealing with constant harassment and threatening letters.

2. Remaining Debt Is Written Off at Completion

When you successfully complete your IVA — making all your agreed monthly payments over the full term — any remaining unsecured debt included in the arrangement is legally written off. You will not owe the balance. For people with large unsecured debts relative to their income, this write-off can amount to tens of thousands of pounds that they would never realistically have been able to repay in full.

3. A Single Affordable Monthly Payment

Your IVA payment is calculated based on what you can genuinely afford after covering all your essential living costs — rent or mortgage, food, utilities, transport, clothing, and other reasonable expenses. The IP works out a surplus income figure and bases the monthly contribution on that. You make a single payment each month to your IP, who distributes it amongst your creditors. No more juggling multiple payments to multiple creditors.

4. Your Home Is Not Automatically at Risk

Unlike bankruptcy, entering an IVA does not put your home at immediate risk. If you are a homeowner, you can typically remain in your property and continue making your mortgage payments as normal. The equity in your property will be considered in the final year — you may be asked to remortgage to release some equity — but you will not be forced to sell your home to pay creditors, as might happen in bankruptcy.

5. Creditors Must Accept the Outcome

Once 75% of the debt value votes in favour, the IVA binds all creditors — even dissenting ones. This is a significant legal mechanism that protects you from a minority of creditors continuing to pursue you while others have accepted the arrangement.

6. Professionally Supervised Process

Your Insolvency Practitioner acts as an impartial supervisor throughout the arrangement. They ensure the IVA runs correctly, handle creditor queries, manage annual reviews, and protect your interests within the framework of the law. This professional oversight provides structure and accountability on both sides.

The Disadvantages of an IVA

1. Long-Term Commitment — Five to Six Years

An IVA typically lasts five years, or six years if you are a homeowner and the equity release clause applies (or if you cannot remortgage in the final year). That is a significant period during which your finances are constrained, your spending is monitored, and you must make consistent monthly payments. Life can change a great deal in five years — job losses, illness, relationship breakdown — and these changes can put the arrangement under serious strain.

2. Impact on Your Credit File for Six Years

An IVA is recorded on your credit file for six years from the date it starts. During that time, obtaining credit, a mortgage, or many financial products will be extremely difficult. You will typically be restricted to specialist lenders with higher interest rates. Even after the IVA is completed and removed from the register, the credit file record remains for the full six-year period from the start date.

3. Strict Budget and Spending Restrictions

During an IVA, you must live within a carefully managed budget. You cannot take on new credit of £500 or more without informing the lender that you are in an IVA. Any significant increase in your income may trigger a revision of your monthly payment upward. Annual reviews are thorough — you will need to submit payslips, bank statements, and a full account of your income and outgoings each year.

4. 75% Creditor Approval Is Not Guaranteed

An IVA only proceeds if creditors holding 75% or more of your total debt value vote in favour. While most IVA proposals that reach the creditors’ meeting are approved, rejection is possible — particularly if your largest creditors feel the proposal does not offer them enough. If the IVA fails at this stage, you will need to explore other options.

5. Fees Are Substantial

IVA fees are paid from within your monthly contributions rather than added on top, but they are still substantial. Total fees across the life of an IVA can range from £3,000 to £10,000 or more. This means a portion of every monthly payment you make goes to your IP rather than directly reducing your debts. Fees must be fully disclosed before you sign anything — always read the proposal carefully.

6. Equity Release in the Final Year

If you are a homeowner, in the final year of your IVA you will typically be required to obtain a valuation and explore remortgaging to release equity. If equity exists and you can remortgage, some of it will need to be paid into the arrangement. If you cannot remortgage — common because of the impact on your credit — the IVA will be extended by 12 months of additional payments instead. This is worth understanding clearly before you start.

7. Failure Has Serious Consequences

If an IVA fails — because payments stop, circumstances change dramatically, or the arrangement collapses — the debts return to their original position. Creditors can resume action, and bankruptcy often follows. Entering an IVA with an unstable income or unrealistic payment commitments significantly increases the risk of failure.

Is an IVA the Right Choice for You?

An IVA tends to be most appropriate for people who:

• Have multiple unsecured debts totalling roughly £6,000 or more
• Have a regular, reliable income with genuine surplus after essential costs
• Want to avoid bankruptcy and protect their home
• Accept the commitment of five or six years of managed finances

It is less likely to be appropriate if your income is unpredictable, your debts are primarily secured, you might qualify for a free Debt Relief Order, or you could realistically repay your debts within a few years through a Debt Management Plan.

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.

Updated for 2026

What Is the Breathing Space Scheme?

The Breathing Space scheme — officially called the Debt Respite Scheme — is a government initiative that gives people struggling with problem debt a temporary period of legal protection from creditor action. During this protected period, most creditors must stop adding interest and charges to your debts, pause enforcement action, and stop contacting you about repayment.

The scheme was introduced in May 2021 and continues to help thousands of people across England and Wales each year. It is not a debt solution in itself — it does not write off or reduce what you owe — but it provides vital breathing room so you can get proper debt advice and explore which solution is right for your situation, without the constant pressure of creditor contact and escalating balances.

The Two Types of Breathing Space

There are two distinct types of breathing space available, depending on your circumstances:

Standard Breathing Space

This is available to anyone in problem debt who is working with a registered debt adviser. It provides up to 60 days of legal protection from most creditor action. During this period:

• Interest, fees, and charges on qualifying debts must be frozen
• Most enforcement action — including bailiff visits and new court proceedings — must be paused
• Creditors must stop contacting you about the included debts
• New county court judgments cannot be sought for qualifying debts

Mental Health Crisis Breathing Space

This is available to people who are receiving mental health crisis treatment. It lasts for the full duration of your crisis treatment, plus 30 additional days. There is no upper time limit — it continues for as long as you remain in crisis treatment. This recognises that people in a mental health crisis are particularly vulnerable and need extended protection from financial pressure.

The same protections apply as with standard breathing space, but the duration can be significantly longer depending on how long the mental health treatment continues.

Who Can Use Breathing Space?

To be eligible for standard breathing space, you must meet the following conditions:

• You must be an individual (not a business) living in England or Wales
• You must have at least one qualifying debt that you are struggling to repay
• You must not already be in a current insolvency procedure — this includes an active IVA, Debt Relief Order, or undischarged bankruptcy
• You must not have had a standard breathing space in the previous 12 months (this 12-month restriction does not apply to mental health crisis breathing space)

You cannot apply for breathing space directly. It must be applied for on your behalf by a registered debt adviser at an FCA-authorised organisation. This ensures the scheme is used by people who genuinely need it and are engaging with the debt advice process.

How to Apply for Breathing Space

The process is straightforward once you engage with a debt advice provider:

1. Contact a debt advice service. Reach out to a free, regulated debt advice organisation. They will assess your financial situation and determine whether breathing space is appropriate for you.
2. Your adviser registers the breathing space. If you are eligible, your debt adviser submits the application electronically on your behalf. Your creditors are notified and the protections begin immediately.
3. You engage with the advice process. During the breathing space period, you must continue to work with your adviser. If you stop cooperating, the breathing space can be cancelled early.

The whole process is handled by your adviser, so you do not need to contact your creditors yourself at any point.

What Is Protected — and What Is Not?

Most personal unsecured debts can be included in a breathing space, including credit cards, personal loans, overdrafts, council tax arrears, utility bill arrears, rent arrears (in most cases), and hire purchase debts. The protections apply specifically to the debts included in your breathing space.

Certain debts and obligations are not covered by breathing space:

• Ongoing liability for council tax for the current year (though council tax arrears can be included)
• Court fines and criminal fines
• Child maintenance payments
• Student loans

Your adviser will be able to confirm exactly which of your specific debts qualify and which do not.

Your Responsibilities During Breathing Space

Breathing space is not a holiday from your finances. You have ongoing responsibilities during the protected period:

• You must continue to pay your ongoing bills as they fall due — breathing space does not pause your regular outgoings such as rent, mortgage payments, or utilities for the current period
• You must engage with your debt adviser and cooperate fully with the advice process
• You must inform your adviser of any significant change in your circumstances

If you fail to cooperate with your debt adviser, they can cancel the breathing space before the 60 days are up. This is rare, but it is important to stay engaged throughout the process.

What Happens After the 60 Days?

The breathing space period gives you protected time to explore your debt solution options with the help of your adviser. During those 60 days, your adviser should work with you to identify the most appropriate route forward — whether that is a Debt Management Plan, an IVA, a Debt Relief Order, or another solution.

At the end of the breathing space, the protection from creditor action ends. If no longer-term solution has been put in place, creditors can resume contact and enforcement. This is why it is crucial to use the 60 days productively by genuinely engaging with your adviser and making progress towards a plan.

For many people, breathing space acts as the gateway to a formal debt solution. For others, it provides enough time to negotiate directly with creditors and arrange manageable repayments informally.

Breathing Space and Mental Health

The mental health crisis breathing space is a particularly important provision for people at their lowest point. Financial stress and mental health problems frequently go hand in hand, and the cycle of creditor contact, threatening letters, and enforcement action can make it extremely difficult for someone in crisis to take positive steps.

If you are receiving crisis care from a mental health professional and you have problem debts, ask your doctor, nurse, or care coordinator whether mental health crisis breathing space might be appropriate. Your mental health care team or a debt adviser working with mental health services can help arrange this.

Is Breathing Space Right for You?

Breathing space is worth considering if you:

• Are being contacted by multiple creditors and feeling overwhelmed
• Are facing imminent enforcement action such as bailiffs or a county court judgment
• Need time to seek proper debt advice without the pressure of escalating interest and charges
• Are in a mental health crisis and need extended protection while receiving treatment

It is also worth knowing what breathing space will not do. It will not write off your debt, reduce your balances, or resolve your debt problem on its own. But as a protective breathing space — a pause that allows you to get organised, take advice, and plan — it can be an invaluable first step.

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.