Once in place an IVA is legally binding on the creditors included in the arrangement. The area of the law governing this debt solution is the Insolvency Act of 1986.
Included in this article:
- When was the law regarding IVAs introduced?
- What is the IVA Protocol?
- Non Protocol IVAs
- Revisions to the IVA Protocol
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When was the Law regarding IVAs introduced?
IVAs were introduced into the law in 1986 through Part 1 of the Insolvency Act. They were originally designed as an alternative to bankruptcy for use by company directors.
However the solution is not just available for business people. Anyone can apply for an IVA if they feel it is a sensible way to resolve their debt problem.
In fact, over the past 10-15 years this form of arrangement has become one of the most popular debt solutions. Since 2009 around 4000 people a month have started an IVA. They come from all walks of life.
An IVA requires a formal proposal of repayment to your creditors. You are not allowed to produce this yourself. It can only be done by a Licensed Insolvency Practitioner (IP).
What is the IVA Protocol?
The Insolvency Act does not provide detailed guidance about what an IVA proposal should look like. It simply requires an offer of repayment to be made to creditors which gives a clear benefit over bankruptcy.
It has always been left to individual Insolvency Practitioners to decide the actual content of the proposal and the offer it should contain. As a result a wide variation of different styles developed over the years. This became confusing for creditors and individuals alike.
As a result, in 2008 the IVA Protocol was introduced. This was an agreement between the major commercial creditors and Insolvency Practitioners to use a common standard for proposal formats and terms and conditions. Where it is used, there is generally a commitment from creditors to accept the Arrangement without modification.
Non Protocol IVAs
Not all IVA companies use the IVA Protocol. It is not a legal requirement. There are some major IVA companies who choose to use different, more bespoke IVA proposal formats. An example of the is the R3 (The Association of Business Recovery Professionals) format.
There are a number of reasons why a more bespoke IVA might be required. Examples of these are:
- Where you have a considerable amount of equity in your home.
- If you are self employed with trade creditors and/or HMRC debt.
- Where you own investment properties over and above your main home.
A bespoke IVA might include a clause requiring you to release equity from your property as part of the agreement.
Revisions to the IVA Protocol
There have been a number of major revisions to the IVA Protocol since its introduction in 2008.
July 2014
This revision to the Protocol was significant. This is because it introduced the requirement for home owners to attempt to release equity from their property using a re-mortgage or secured loan. This became known as the equity release clause.
June 2016
The most notable change in 2016 was more flexibility around payment breaks. As a result of this revision, an individual may now take up to 9 months of payment breaks during their IVA.
August 2021
In August 21, the Protocol was updated again. This time, much welcomed clarity was provided around the property equity release clause. It included information about when equity release will and will not be necessary and what happens if is not required.:
April 2025
The latest revision of the Protocol (known as the IVA Protocol 2025) became effective from the 1st April 2025. This revision is one of the most important since 2014. It has removed the need for home owners to release equity from their property in all new Protocol compliant IVAs. In affect it has reversed the provision introduced in 2014.