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 (making it hard to get credit), you face spending restrictions, you might have to release equity from your home, there are setup fees, and if you fail to keep up payments, the IVA can collapse and leave you worse off.

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

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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

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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.

You Might Have to Release Equity from Your Home

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If you’re a homeowner with more than £10,000 equity in your property, the 2025 IVA Protocol requires you to try to release some of that equity in your final year.

Your IP will ask you to remortgage or take out a secured loan against your property. The money released goes into your IVA and is shared among your creditors.

If you can’t remortgage (because lenders won’t approve you due to your credit rating), your IVA extends by 12 months. So instead of 5 years, it lasts 6 years.

Many people in IVAs can’t remortgage because their credit score is too damaged. This means most homeowner IVAs automatically extend to 6 years.

And even if you do release equity, you’re reducing the value of your biggest asset. If you were planning to use that equity for retirement, home improvements, or helping your children, an IVA forces you to hand it over to creditors instead.

Your Spending Is Monitored and Restricted

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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

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If you receive any unexpected money during your IVA, most of it must be paid into the arrangement. This includes:

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

The threshold varies, but typically anything over £500 counts as a windfall.

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

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

Typical fees:

• Setup fee (nominee fee): Around £1,000-£2,000 to draft and submit your proposal
• Supervisor fee: 15-20% of every payment you make during the IVA
• IP’s fee: Additional yearly fee (often £1,000-£2,000 per year)

These fees are deducted from your IVA payments before any money goes to your creditors.

For example, if you pay £200/month into your IVA for 5 years (£12,000 total), around £2,000-£3,000 of that goes to fees. Only £9,000-£10,000 actually goes to your creditors.

The fees are regulated, so all IPs charge similar amounts. But it still means a significant chunk of your payments goes to the IP rather than reducing your debt.

Your IVA Is Public Information

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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

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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

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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

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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

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As discussed in our guide on renting with an IVA, landlords often run credit checks on prospective tenants. An IVA will show up, which can make it harder to rent a property.

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

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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

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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): Lasts 12 months, then debts are written off. Free to apply (as of April 2024). Suitable if you have less than £50,000 debt, less than £75/month spare income, and few assets.

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

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Can I cancel my IVA if I change my mind?

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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?

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Contact your IP immediately. They’ll reduce your payments to reflect your loss of income, and you might get a payment break while you find new work. Your IVA won’t fail as long as you communicate with your IP.

Can I remortgage during my IVA?

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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?

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Not unless you have joint debts. If you have a joint credit card or loan, your partner is still liable for their half even though your half is in the IVA. Your IVA itself doesn’t directly affect your partner’s credit rating.

Are there any benefits to an IVA?

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Yes. The main benefits are: creditors stop chasing you, interest and charges are frozen, you write off remaining debt after 5-6 years, and you avoid bankruptcy. But you need to weigh these benefits against the negatives listed above.

Can I get an IVA if I rent my home?

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Yes. IVAs work for both homeowners and renters. If you rent, you don’t have to worry about equity release. But you’ll still face all the other negatives (credit rating, spending restrictions, fees, etc.).

If you’re struggling with debt and want to find out what options are available, use our free IVA calculator to see if you qualify and how much debt you could write off. It takes 2 minutes and won’t affect your credit score.