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A Brief History of the IVA

14 March 2008

These days, most people in severe debt know they can – if necessary – look into insolvency: declaring themselves legally unable to pay off their unsecured debts, paying what they can and making a fresh start, free of debt.

Voluntary bankruptcy has been an option ever since 1883, but IVAs (Individual Voluntary Arrangements) are much newer.

In 1986, there were 7,093 bankruptcies in England and Wales – and 0 IVAs.

When the IVA was introduced, the idea was to allow small business to resolve their debt problems while still trading. But during the mid-90s, a rise in consumer debt led to an increase in bankruptcies, and Insolvency Practitioners* (IPs) started proposing IVAs as a solution for personal debt.

In 2007, there were 64,481 bankruptcies in England and Wales – and 42,166 IVAs.

There are many reasons IVAs have become more popular. Perhaps the most important:

1. Increasing levels of consumer debt.
2. Increasing awareness of the IVA as an alternative to bankruptcy.
3. Increasing awareness that an IVA can help people avoid many of the consequences of bankruptcy (e.g. loss of home, publicity, inability to work in certain fields).

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* An IVA can only be carried out by a licensed Insolvency Practitioner, a professional (usually an accountant or solicitor) who is qualified to carry out insolvency cases.

There are 9 regulatory bodies in the UK which issue licenses to IPs. Every year, they check to see that IPs are abiding by the Insolvency Act 1986 – if they are not, they can be fined or have their licence removed.

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