Can we take out an individual voluntary arrangement (IVA) for paying off debts?

Q: I have a huge amount of debts and I am considering taking out an IVA plan even though I can make the payments to the companies, Is it permissible for me to take an IVA  which means I will not pay back all the money I owe to the creditors which means up to 60% of debt could be wiped off?


الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب

A: A debt always remain payable to a creditor unless the creditor absolves the debtor of the debt. A third party cannot rescind or diminish the debt obligation. Thus an individual voluntary arrangement (IVA) cannot forcibly reduce one’s debt obligations. Furthermore, as you have stated that you can make payments to your creditor companies, not only is this not allowed under the rules of an IVA, it is also a form of oppression [al-Bukhari] and legitimises punitive measures [Abu Dawud].

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