New research highlights importance of impartial debt advice

Research by the Insolvency Service has highlighted the importance of getting impartial debt advice before opting for an individual voluntary arrangement (IVA).

The study examined 310 IVAs registered and finished between 2021 and 2023 and found that 60% had evidence of poor practice in the early stages, including:

• recording people's income and spending inaccurately
• wrongly saying other debt solutions wouldn’t be suitable for them
• failing to make sure people fully understood the terms of their IVA

What’s an IVA?

An IVA is a legally binding agreement between you and your creditors to pay back your debts at a rate you can afford.

It usually lasts for five or six years. After that time, any remaining debt included in your IVA is written off.

During your IVA, as long as you make the agreed payments, creditors aren’t allowed to charge interest or fees on your debts. They also have to stop chasing you to pay.

IVAs cover most non-priority debts, like: 

• credit cards
• payday loans
• store cards
• overdrafts
• personal loans

Keep in mind that an IVA will affect your credit rating, and you’ll have to pay a fee. 

Find out everything you need to know about IVAs here.

Who can get an IVA?

There aren’t black and white rules about who can get an IVA.

Providers take into account lots of factors before deciding whether an IVA is suitable for you, but you’ll usually need:

• a regular source of income
• non-priority debts (credit cards, buy now pay later, personal loans, overdrafts etc.) of at least £5,000
• to live in England, Wales or Northern Ireland
• to owe money to more than one creditor

Can I get debt advice from my IVA provider?

To offer an IVA, you have to be a licensed insolvency practitioner.

A person acting solely as an insolvency practitioner isn’t regulated by the Financial Conduct Authority.

This means they can’t tell you about any other debt solutions that might be suitable, or maybe even better, for your situation.  

The dangers of not getting proper debt advice

Claire Hardgrave, head of Insolvency Practitioner Regulation for the Insolvency Service, said:

“While IVAs can work well for many, if an IVA is unsuitable it can leave people struggling with their household budget, being in debt for longer, or even taking on more debt to make their IVA payments.”

Always seek debt advice first 

In the right cases, an IVA can be a great way to get back on track with your money. But you’ll only know if it’s right for you by getting proper debt advice first.

Anna Hall, corporate director for debt at the Money and Pensions Service, stressed the importance of access to free and impartial advice for those struggling with debt:

"A debt adviser will treat everything you say in confidence, never judge you and will suggest ways of dealing with debts that you might not know about."

So before you take out a solution, make sure you’re aware of all possible options for your situation.

We offer full, FCA-approved advice for free, online and over the phone. Get in touch and we’ll talk through your financial situation and discuss any suitable debt solutions.

Some debt solutions are free. Others, like IVAs, have a fee.

Improving IVA services

In response to the findings, the Insolvency Service say they’re working with industry regulators to make sure those in debt are getting the best advice. They want to:

• create new advertising rules
• simplify the process for people entering IVAs
• give more information to people before they sign up to an IVA
• offer better training for staff at insolvency firms