Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors to repay a portion of their debts over a specified period, typically five to six years. An IVA allows individuals to avoid bankruptcy by negotiating a manageable repayment plan based on their financial circumstances. Once the IVA is approved, creditors are legally bound by its terms, and any remaining debt is typically written off at the end of the arrangement.

Importance of understanding an IVA

Debt management

Understanding IVAs is crucial for effective debt management. An IVA provides a structured repayment plan, helping individuals manage their debts and avoid the severe consequences of bankruptcy.

Legal protection

An IVA offers legal protection from creditors, including halting legal actions and preventing further interest and charges on debts. This protection provides relief to individuals struggling with debt.

Financial planning

Knowing how an IVA works helps individuals plan their finances and budget effectively. By understanding the repayment terms and obligations, individuals can regain control of their financial situation.

Credit impact

While an IVA affects an individual’s credit rating, it is generally seen as less damaging than bankruptcy. Understanding the credit implications helps individuals make informed decisions about their debt management options.

Eligibility and feasibility

Assessing eligibility and the feasibility of an IVA is essential for individuals considering this debt solution. Factors such as the amount of debt, income, and living expenses play a crucial role in determining whether an IVA is the right choice.

Key components of an IVA


The IVA process begins with the individual, or their insolvency practitioner, drafting a proposal to present to creditors. The proposal outlines the individual’s financial situation, including income, expenses, and the proposed repayment plan.

Insolvency practitioner (IP)

An insolvency practitioner is a licensed professional who helps individuals set up and manage their IVA. The IP acts as an intermediary between the individual and their creditors, ensuring that the arrangement is fair and legally compliant.

Creditors’ meeting

Creditors are invited to a meeting to discuss and vote on the IVA proposal. For the IVA to be approved, at least 75% (by value) of the creditors who vote must agree to the terms. Once approved, the IVA becomes legally binding on all creditors, including those who did not vote or voted against the proposal.

Repayment plan

The repayment plan specifies the amount the individual will pay each month and the duration of the arrangement. Payments are based on the individual’s disposable income after essential living expenses are deducted.


Throughout the IVA, the insolvency practitioner supervises the arrangement, collects payments from the individual, and distributes them to creditors. The IP also reviews the individual’s financial situation periodically to ensure they can continue making payments.


At the end of the IVA term, any remaining unsecured debt is typically written off, and the individual is released from their debts. A completion certificate is issued, signifying the end of the arrangement.

Pros and cons of an IVA


  • Debt relief: An IVA provides a structured way to repay debts, with any remaining debt typically written off at the end of the arrangement.
  • Legal protection: Creditors are legally bound by the IVA, preventing further legal action, interest, and charges on debts.
  • Budget management: Payments are based on what the individual can afford, allowing for better financial planning and budgeting.
  • Credit rating: While an IVA affects credit ratings, it is generally less damaging than bankruptcy.
  • Asset protection: An IVA allows individuals to retain assets, such as their home, which might be at risk in bankruptcy.


  • Credit impact: An IVA remains on an individual’s credit report for six years from the start date, affecting their ability to obtain credit.
  • Commitment: Individuals must adhere to a strict repayment plan for the duration of the IVA, typically five to six years.
  • Eligibility: Not all individuals qualify for an IVA; it is usually suitable for those with significant debts and disposable income.
  • Fees: Insolvency practitioners charge fees for setting up and managing the IVA, which are typically included in the monthly payments.
  • Risk of failure: If the individual fails to meet the repayment terms, the IVA could fail, potentially leading to bankruptcy.

Applications of an IVA

Personal debt management

Individuals struggling with personal debts, such as credit card debt, personal loans, and overdrafts, can use an IVA to negotiate manageable repayments and avoid bankruptcy.

Small business owners

Self-employed individuals and small business owners can use an IVA to address personal debts while continuing to operate their business. This allows them to manage their finances without closing their business.

Financial hardship

Individuals facing financial hardship due to unforeseen circumstances, such as job loss or medical expenses, can use an IVA to restructure their debts and regain financial stability.

Property owners

Homeowners with significant unsecured debts can use an IVA to protect their property from being sold, which might be required in bankruptcy proceedings.

IVA in action

Consider an individual in Brisbane with unsecured debts totaling $60,000. Their monthly disposable income, after essential living expenses, is $500. They work with an insolvency practitioner to propose an IVA with the following key aspects:

  1. Debt amount: $60,000
  2. Monthly repayment: $500
  3. IVA term: 5 years (60 months)
  4. Total repayments: $500 x 60 = $30,000

If the IVA is approved by creditors, the individual will make monthly payments of $500 for five years. At the end of the IVA term, any remaining debt is written off, providing the individual with debt relief and financial stability.

Connection to loans

IVAs are relevant in various financial scenarios, including building loans, business loans, and bridging loans. Lenders may assess an individual’s existing IVA when considering loan applications, as it affects their creditworthiness and repayment capacity. Understanding the role and implications of IVAs helps borrowers, lenders, and financial planners manage debts and financial commitments effectively.

External links

For more information on Individual Voluntary Arrangements and their implications, visit the following resources:

  1. Australian Financial Security Authority (AFSA) – Personal Insolvency
  2. Moneysmart – Managing Debt


An Individual Voluntary Arrangement (IVA) offers a structured and legally binding way for individuals to manage and repay their debts, providing an alternative to bankruptcy. Understanding the key components, benefits, and limitations of an IVA is essential for making informed decisions about debt management and financial planning. Whether dealing with personal debts, small business finances, or property-related liabilities, an IVA can provide the necessary relief and protection to regain financial stability. By carefully considering eligibility and working with a licensed insolvency practitioner, individuals can navigate their debt challenges and achieve long-term financial success.

DISCLAIMER: The information provided on this page is for general informational and educational purposes only and is never intended as financial advice. While we strive to ensure that the content is accurate and up-to-date, it may not reflect the most current legal or financial developments. Always consult with a qualified financial advisor or professional before making any financial decisions. Use the information at your own risk.


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