Home Equity in an IVA: The Remortgage Rule

If you own your home and are considering an individual voluntary arrangement (IVA), the question that decides whether it is workable is usually what happens to the equity in the property. An IVA is a formal deal with your creditors, arranged through a licensed insolvency practitioner, in which you pay a reduced amount for a fixed period and the remaining debts are written off when you complete it¹. Where there is equity in your home, the arrangement may be agreed at six years instead of five².

The equity rule is not a demand for a lump sum on day one. It is a clause in the proposal that sets out what you will be asked to do towards the end of the arrangement, and what happens if you cannot do it. The most common outcome for homeowners who cannot remortgage is a set number of extra monthly payments rather than a forced sale.

This page explains how equity is calculated, what the IVA Protocol says, what happens if you cannot release the money, and how the rule interacts with the rest of the arrangement.

How the equity clause works

An IVA proposal is a document your creditors vote on. If you are a homeowner, your insolvency practitioner will follow the IVA Protocol 2025 guidelines on how equity affects your IVA proposal⁵. The protocol is the industry standard that keeps consumer IVAs consistent, and it is why the equity term looks broadly similar across different providers.

The clause normally does two things. First, it sets a point in the arrangement, usually in the final year, at which you are expected to try to release equity by remortgaging or taking a secured loan. Second, it sets a fallback: if you cannot get a loan, the IVA is extended instead. Independent guidance describes the same mechanism in these terms: if you have any equity in your home, you may be asked to apply for secured loans and pay a lump sum, and if you cannot get a loan the IVA could be extended⁶.

The practical effect is that the equity clause is a known, dated obligation rather than an open-ended claim on your home. It is agreed at the start, it appears in the proposal your creditors vote on, and it is supervised by the insolvency practitioner throughout.

How equity is calculated

The figure that matters is not the difference between your home's value and your mortgage. It is calculated by subtracting the amount you owe your mortgage company from the market value of your home³. The protocol's allowance is built into that calculation, and it means a homeowner with a modest amount of equity may fall below the threshold entirely.

Two consequences follow. First, the calculation uses market value, so a valuation is part of the process. Second, because the mortgage balance is deducted in full, anyone in negative equity or close to it has no equity for these purposes and the clause does not bite.

The threshold that decides whether you are asked to release anything is £10,000. If you own your own home and have more than £10,000 of equity, you would be required to make an additional twelve months of payments³. Below that figure, the extension does not apply.

What happens if you cannot remortgage

This is the part that worries homeowners most, and the answer is usually straightforward. If you cannot get a loan, the IVA could be extended⁶. The extension is twelve months of payments at your existing agreed monthly amount, not a demand for the equity as cash.

That matters because remortgaging during an IVA is difficult in practice. Lenders assess affordability and credit history, and an IVA is recorded on your credit file. Many homeowners find that no lender will offer a remortgage on acceptable terms, which is precisely why the protocol contains a fallback rather than an absolute requirement to release the money.

The extension is not free money either. Twelve extra months of payments at your agreed rate is a real cost, and it is worth understanding before you sign the proposal rather than at the end. The alternative to an IVA for a homeowner with equity is usually bankruptcy, which carries its own consequences for the property, and the two are compared in IVA or bankruptcy.

How StepChange arranges IVAs through its insolvency practitioners

IVAs are arranged by StepChange Voluntary Arrangements, which is part of StepChange Debt Charity⁷. You can only get an IVA with the help of an insolvency practitioner, and IVAs are supervised by licensed insolvency practitioners¹. Clare Lindley and James O'Carroll of StepChange Voluntary Arrangements are licensed to act as insolvency practitioners in the UK by the Insolvency Practitioners Association⁹.

StepChange states that it is an approved organisation to manage IVAs¹⁰. The charity also offers free debt management plans and other solutions, so an IVA is one option among several rather than the default answer¹¹. The process runs through an online account: you send documents for your IVA, there is a meeting of creditors at which the proposal is voted on, and your IVA cannot start until StepChange has spoken to you about the voting outcome¹².

Once the arrangement is running, your details appear on the Individual Insolvency Register, which is a public record¹³. Payments are made monthly, and the amount is based on your income and essential expenditure rather than a fixed formula.

IVA fees: taken from your monthly payment, nothing up front

There are no upfront fees on a StepChange IVA⁴. StepChange does not charge for advice, and payments are made to the insolvency practitioner once the IVA is in progress¹. The charity puts it plainly: its IVA fees come out of the agreed monthly payment, with no charge on top and no upfront fees². If the IVA is not approved, there is nothing to pay⁴.

The monthly payment itself is worked out from your circumstances. It is calculated by subtracting all of your monthly essential expenditure, including travel costs, food, utilities and insurance, and priority debt arrears payments such as mortgage arrears, Council Tax arrears and court fine arrears, from your monthly income from wages, benefits and investments¹⁴. Because the payment takes all of your monthly living costs into account, you are not expected to borrow to fund it¹⁵.

StepChange also states that all the money it makes from IVAs is gift aided back to the charity, so it does not make a profit from them². StepChange Voluntary Arrangements gift aids any profits from IVAs to the charity⁴. The charity has separately called for reform of fees in the IVA market, arguing that fee structures should incentivise sustainable solutions and that everyone should access FCA-regulated debt advice before entering a personal insolvency solution¹⁶.

Completing an IVA: 85% of StepChange clients finish debt free

For the last five years, 85% of the people who have had an IVA with StepChange have successfully completed it and become debt free². That is the figure that matters most when weighing an IVA against the alternatives, because an IVA that fails leaves the debts in place and the fees already paid are not returned.

Completion is not automatic. It depends on keeping up the monthly payments for the full term, which is five years, or six where there is equity in your home². It also depends on dealing with anything the arrangement requires in the final year, including the equity step. Where a payment is missed or income drops, the arrangement can be varied rather than lost, and the options are set out in what happens if you miss IVA payments and reducing IVA payments.

StepChange's wider client data gives a sense of scale: 14,050 clients completed full debt advice in October 2025¹⁷. Not all of those will have taken an IVA, and the figure covers all debt advice outcomes rather than IVAs alone.

Complaints about your IVA and where to take them

If something goes wrong with the way your IVA is being run, there is a route to complain. Any complaints about the insolvency practitioner's regulated work should be completed online at gov.uk/complain-about-insolvency-practitioner¹². If StepChange is unable to settle your complaint, you may complain to the regulatory body that licences its insolvency practitioners¹⁸.

StepChange can give tips on making a complaint, but it cannot write a letter for you¹⁹. Where the complaint is about a creditor rather than the practitioner, the route is different, and it is covered in complaining about a creditor.

The Financial Ombudsman Service is the route for complaints about equity release products themselves. If you are unhappy with an equity release company's response, the complaint can go to the ombudsman, but the company is first given the chance to hear what you are unhappy about and why²⁰. That route applies to the equity release product, not to the conduct of the IVA.

Where the equity rule does not apply

The equity clause only bites where you own a home with equity above the threshold. If you rent, or you own but have little or no equity once the mortgage is deducted from 85% of the value, the standard five year term applies and there is no twelve month extension³.

The rule also differs by nation. StepChange Voluntary Arrangements covers England, Wales and Northern Ireland only⁷. In Scotland, the equivalent formal solutions are a protected trust deed or sequestration, and the Debt Arrangement Scheme is a separate statutory option. StepChange has helped people across Scotland for 30 years from its Glasgow head office, but it does not arrange IVAs there²¹. The Scottish options are set out in protected trust deeds, sequestration and the Debt Arrangement Scheme.

One further limit is worth knowing before you commit. StepChange does not offer interlocking IVAs²². An interlocking IVA is a joint proposal to all creditors that considers both partners' circumstances and debts together, and it is available from other providers²³. If you and a partner both have debts, each IVA is assessed separately, which can produce a different outcome than a joint arrangement would.