What is an IVA?

IVA is the short form term used to describe an Individual Voluntary Arrangement.

IVAs were introduced into English Law as part of The Insolvency Act 1986 – – covering England, Wales and N. Ireland but specifically excluding Scotland which has its own form of IVA legislation (See Protected Trust Deeds). The IVA legislation was enacted to provide formal help to consumers (and certain classes of self employed) with overwhelming debt problems. Prior to the enactment of The Insolvency Act many consumer debtors experiencing significant debt problems and pressure from creditors would usually have had no option but to seek the protection of the Court by petitioning for bankruptcy.
The government were becoming increasingly concerned that bankruptcy was not only the most drastic step a debtor could take, but was also actually highly counterproductive. Bankruptcy is usually a "lose – lose" situation for all parties concerned as :-

• The consumer debtor risks losing all major assets including the family home
• The unsecured creditors usually get little or no return at all on the debts
• There was historically both a social and future employability stigma associated with bankruptcy providing future earnings impact for the bankrupt.

The IVA alternative has been called both "second chance legislation" and "government rescue legislation". Under the legislation the debtor can propose an IVA to his/her creditors to restructure overwhelming debts where the only other alternative is usually bankruptcy.