What Are the Negatives of an IVA?

An IVA isn’t perfect. While it writes off debt and stops creditors chasing you, it comes with significant downsides that last for years.

The main negatives are: it stays on your credit file for 6 years, you face spending restrictions, home ownership can mean a 72-month protocol term, there are fees, and a failed IVA can leave creditors able to restart action.

Before you commit to an IVA, you need to understand these downsides. For some people, the negatives outweigh the benefits.

Your Credit Rating Takes a 6-Year Hit #

An IVA stays on your credit file for 6 years from the start date. Even if you complete your IVA in 5 years, it remains visible for the full 6 years.

During this time:

• You’ll struggle to get approved for credit cards, loans, or mortgages
• If you do get approved, interest rates will be sky-high
• Renting a new property becomes difficult (landlords run credit checks)
• You might fail credit checks for mobile phone contracts or car finance

Once the 6 years are up, the IVA is removed from your credit file. Your credit score can then start to recover. But for those 6 years, your financial options are severely limited.

If you’re already struggling with debt, your credit rating is probably damaged anyway. But an IVA makes it worse and prolongs the damage.

You Can’t Take On New Credit Without Permission #

During your IVA, you can’t borrow more than £500 without written permission from your Insolvency Practitioner (IP).

This includes:

• Credit cards
• Personal loans
• Car finance
• Overdrafts
• Store cards or buy-now-pay-later schemes
• Mobile phone contracts (if they involve credit)

If you need to borrow money — even for an emergency — you must ask your IP first. They’ll only approve it if it’s absolutely necessary and you can afford to repay it alongside your IVA payments.

Breaking this rule is a breach of your IVA terms, which could cause your IVA to fail.

This restriction lasts for the full term of your IVA (usually 5-6 years). It can feel stifling, especially if you’re used to having access to credit when unexpected expenses arise.

Home Ownership Can Mean a 72-Month Term #

For a 2025 Protocol IVA, the proposal must not require you to realise your interest in the family home to fund the arrangement. Equity is calculated at 85% of the property’s value less secured borrowing.

If your individual beneficial interest is £10,000 or more, the proposed protocol term is normally 72 months instead of 60 months. If it is below £10,000, the family home is excluded without that extension. For jointly owned homes, the £10,000 test applies separately to each consumer’s share.

Very high equity can make a protocol IVA unsuitable, and a second or buy-to-let property may require bespoke advice. Older and bespoke IVA terms can differ, so check the signed proposal rather than relying on the 2025 Protocol alone. Read how an IVA affects your home and property for the calculation and older rules, or renting with an IVA if a future move is the concern.

Your Spending Is Monitored and Restricted #

Your IP will create a budget showing your income and essential expenses. Anything left over becomes your IVA payment.

Your IP decides what counts as “essential.” If they think you’re spending too much on non-essentials (like gym memberships, subscriptions, or eating out), they’ll ask you to cut back and increase your IVA payment.

During your IVA:

• You can’t go on expensive holidays without IP approval
• Large purchases (like a new car) need IP approval
• If your income increases (pay rise, bonus), your IVA payment usually increases too
• You must declare any windfalls (inheritance, redundancy payment, lottery win) — most of it goes into the IVA

This level of financial oversight can feel intrusive. You lose control over your own money for 5-6 years.

Windfalls and Pay Rises Go Toward the IVA #

Unexpected money must be reported and treated under the signed proposal. Depending on the terms, relevant items can include:

• Inheritance
• Redundancy payments
• PPI refunds
• Tax rebates
• Lottery or gambling winnings
• Bonuses from work

Do not rely on a universal £500 threshold. Windfalls, bonus income, redundancy money and after-acquired assets can have different clauses and allowances. Ask the supervisor for a written calculation before spending anything.

Similarly, if you get a pay rise or promotion, your IP will review your budget. If your disposable income increases, your monthly IVA payment will likely increase too.

This can feel unfair. You’re working hard to improve your financial situation, but most of the benefit goes to your creditors.

IVAs Have Setup and Ongoing Fees #

IVAs aren’t free. Your IP charges fees for setting up and managing your IVA.

The proposal should separate nominee remuneration, supervisor remuneration and expenses, show the total expected contributions and estimate the dividend to creditors. Creditors can approve or modify remuneration.

There is no reliable universal range or additional yearly fee that applies to every IVA, and providers do not all charge the same amount. Ask how each fee is calculated, whether it can increase and how it affects the creditor return before signing.

Your IVA Is Public Information #

When you enter an IVA, your details are added to the Individual Insolvency Register. This is a public database that anyone can search.

Your entry includes:

• Your name
• Your address
• The start date of your IVA
• Your IP’s name and contact details

This information stays on the register for 3 months after your IVA ends.

While most people won’t bother searching the register, it means your IVA isn’t completely private. Employers, landlords, or anyone else who knows where to look can find out.

If You Fail to Keep Up Payments, the IVA Can Collapse #

IVAs require you to make regular monthly payments for 5-6 years. If you miss more than 3 payments in a row without contacting your IP, they might issue a Notice of Breach.

If you don’t catch up within the notice period, your IVA can fail.

When an IVA fails:

• You’re back to owing the original debt amounts (minus what you’ve already paid)
• Creditors can restart enforcement action (court, bailiffs, etc.)
• The IVA is removed from the Individual Insolvency Register
• You lose all the progress you’ve made

If your circumstances change and you genuinely can’t afford your payments anymore, contact your IP immediately. They might be able to reduce your payment, arrange a payment break, or extend the term.

But if your IVA fails, you’re left in a worse position than when you started.

Some Debts Can’t Be Included #

Not all debts can be included in an IVA. You’ll still have to pay these separately:

• Secured debts (mortgages, car finance)
• Court fines and criminal penalties
• Child maintenance arrears
• Student loans
• TV licence fines (usually)

If these debts make up a large part of what you owe, an IVA won’t solve your debt problem. You’ll still be struggling to pay priority debts while also making IVA payments.

Make sure you understand what debts can and can’t be included before you commit to an IVA.

It’s a Long-Term Commitment #

Most IVAs last 5-6 years. That’s a long time to be under financial restrictions.

A lot can change in 5-6 years:

• You might get married or have children
• You might want to move house or change jobs
• Your income might fluctuate
• Unexpected expenses will crop up

IVAs are rigid. Once you’re in, you’re committed for the full term. You can’t just cancel an IVA because it’s become inconvenient.

If your circumstances change dramatically (redundancy, serious illness, divorce), your IP can adjust your payments. But the IVA will likely extend to compensate, meaning you’re locked in for even longer.

You Might Face Issues Renting or Getting a Job #

As discussed in our guide on renting with an IVA, a landlord or letting agent may use affordability, reference, credit or public-insolvency checks. An IVA can be relevant to those checks, but there is no single industry-wide pass-or-fail rule.

Similarly, if you work in certain professions (finance, law, armed forces), an IVA might affect your employment.

Check your employment contract before entering an IVA. Some contracts require you to disclose insolvency arrangements.

It Doesn’t Teach You to Budget #

An IVA writes off debt, but it doesn’t address the root cause of your financial problems.

If you got into debt because of poor budgeting, overspending, or relying on credit, an IVA doesn’t fix those habits. Once your IVA ends, you might fall back into the same patterns and end up in debt again.

Some IPs offer budgeting advice and financial education as part of the IVA. But many don’t. If you want to avoid future debt problems, you’ll need to take responsibility for learning how to manage money properly.

Alternatives to an IVA #

Given these negatives, an IVA isn’t right for everyone. Consider these alternatives:

Debt Management Plan (DMP): Informal agreement to pay creditors over time. No debt write-off, but more flexible than an IVA. Suitable for smaller debts or if you want to repay in full.

Debt Relief Order (DRO): Normally lasts 12 months. Listed qualifying debts normally no longer have to be paid at the end if circumstances have not caused the DRO to end. It has no application fee and may fit in England or Wales where qualifying debts are £50,000 or less, spare income is £75 a month or less, and the asset and other rules are met.

Bankruptcy: Writes off debts within 12 months. More severe than an IVA (you lose control of assets), but faster. Suitable if you have no assets and need a fresh start quickly.

Debt consolidation loan: Combine all debts into one loan. Only works if you can get approved and the interest rate is lower than your current debts.

Speak to a debt adviser to explore your options. An IVA might still be the best choice, but you should understand the alternatives first.

Frequently Asked Questions #

Can I cancel my IVA if I change my mind? #

Once your IVA is approved by creditors, you can’t just cancel it. You’re legally bound for the full term. If you stop paying, the IVA will fail, and creditors can restart enforcement action.

What happens if I lose my job during my IVA? #

Contact the supervisor immediately. The signed terms may allow a limited reduction or payment break; a larger or permanent change may need a creditor variation. Approval is not guaranteed, and an IVA can still fail even where the debtor communicates, so get the decision and revised obligations in writing.

Can I remortgage during my IVA? #

Only with your supervisor’s approval. Under the 2025 IVA Protocol, homeowner family-home interest is usually reflected in a 72-month term if your beneficial interest is £10,000 or more. You should not remortgage during an IVA for personal reasons without permission.

Will my partner be affected by my IVA? #

An IVA is personal, but joint debts and assets can affect a partner. Joint borrowers are usually jointly and severally liable, so the non-IVA borrower can remain liable for the outstanding full balance less recoveries, not merely half. The IVA itself is not normally recorded on the partner’s sole credit file.

Are there any benefits to an IVA? #

Potential benefits are that an approved IVA can bind creditors for included qualifying debts, restrict direct collection under its terms and release a remaining included qualifying balance after successful completion. It does not cover every debt, guarantee completion or automatically reverse court or enforcement steps. Compare those benefits with the risks above.

Can I get an IVA if I rent my home? #

Yes. IVAs work for both homeowners and renters. The family-home equity rule does not apply to renters, but the other effects—including credit-file damage, spending restrictions, fees and annual reviews—still need to be considered.

If you’re struggling with debt and want to find out what options are available, use our debt-options calculator for an initial comparison; it cannot confirm eligibility, approval or a write-off amount.