What is an Individual Voluntary Arrangement, or an IVA, as they are most commonly known? Well an IVA was a government initiative and was introduced for the express purpose to reduce repossessions, and prevent borrowers with high levels of unsecured borrowing from bankruptcy.
The IVA was brought into the UK by government legislation as part of the 1986 Insolvency Act.
The 1980`s had seen a prolonged period of high interest rates which resulted in record levels of repossessions, negative equity and personal bankruptcy.
Many high street banks and building societies pursued defaulting borrowers with unforgiving haste, so that a great many of them had to resort to bankruptcy as a last option.
With this, many repossessed and surrendered properties now flooded the housing market, which had already become stagnant through the high interest rates.
This in turn drove prices lower and forced even more into negative equity.
And so the government had to act to prevent this scenario spiralling completely out of control, and they brought in the Individual Voluntary Arrangement, or IVA, in the 1986 act, and it has been with us ever since.
What is an IVA in bald terms? Well, it protects people overwhelmed by unsecured debts from losing their homes or being declared bankrupt.
If certain requirements are met you can place your unsecured debts in the hands of a licenced Insolvency Practitioner, and using a formula set out in the act, the IP negotiates a reduction of the clients debts, typically between 50% to 70%, based on his or her ability to pay.
The criteria to qualify includes being over the age of 18, being in full time work, owing over £11,000 in total, and having least 3 separate creditors.