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Record numbers taking out voluntary arrangements to cope with debts

Record numbers taking out voluntary arrangements to cope with debts

Record numbers of individual voluntary arrangements were taken out last year by people struggling with debt, according to new Government figures.

Individual voluntary arrangements (IVAs) are legally binding agreements for those with problem debts of over £10,000. Debt repayments are combined into a single monthly payment, supervised by an insolvency practitioner – we've more info on how IVAs work below.

According to the Government's Insolvency Service, there was a 10% spike in the number of IVAs registered in England and Wales between 2018 and 2019 – with almost 78,000 IVAs taken out last year.

And the number of IVAs being taken out has leapt by over a third since 2010, when around 50,000 were registered (though numbers have fluctuated in between).

The increasing number of IVAs drove a 6% rise in the total number of individual insolvencies last year – while bankruptcies increased very slightly, the number of debt relief orders taken out saw a small drop.

See our Debt Solutions guide for more info.

What is an IVA?

An IVA is a legally binding agreement which is only available in England, Wales and Northern Ireland. If you're in Scotland, the nearest equivalent is a 'trust deed'.

As part of the IVA, you'll make one monthly repayment – usually for five or six years – which will be divided between organisations and people you owe (your creditors). At the end of the arrangement, any remaining debts will be written off.

It's not free though – the IVA will need to be set up and supervised by an insolvency practitioner, which will deduct fees from your monthly payments. Costs are often between £5,000 and £8,000.

You'll also generally need to put any savings towards the IVA, and won't be able to use credit cards or take out further borrowing during the arrangement.

And it's worth noting that it will appear on your credit file for six years after you take it out, meaning you may find it harder to get other forms of credit.

We've more info in our Debt Solutions guide – but if you're in debt crisis, you should always, always take free debt advice before taking any steps. Citizens AdviceNational Debtline and StepChange offer support and are there to help, not judge.

What does the Government say?

An Insolvency Service spokesperson said: "IVAs are an important debt relief mechanism which many people use to make a fresh start.

"We keep a close eye on how insolvency practitioners are regulated and expect that their membership bodies will take action in cases where professional standards are not being adhered to."