Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Insolvency definition

What does Insolvency mean? In practice, insolvency describes a financial state where a debtor cannot meet liabilities when due, triggering remedies such as administration, liquidation or bankruptcy and informing directors’ duties and avoidance claims. For companies in England & Wales, Scotland and Northern Ireland, the Insolvency Act 1986, s 123 sets two alternative tests: - Cash‑flow insolvency: an inability to pay debts as they fall due. The inquiry is practical and forward‑looking, not confined to today’s bills (Re Patrick & Lyon Ltd [1933] Ch 786; BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28). - Balance‑sheet insolvency: liabilities (including contingent and prospective liabilities) exceed assets on...

Individual voluntary arrangements: implementation, effect on litigation and enforcement, creditor approval and challenges—a dispute resolution perspective

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

This Practice Note provides an overview of individual voluntary arrangements (IVAs) and how they affect legal proceedings from a Dispute resolution standpoint.

What is an IVA?

An IVA is a contract made between an individual and their creditors (and potentially involving third parties) to compromise that person’s debts, or to implement a scheme for managing their affairs, under the Insolvency Act 1986 (IA 1986). The precise form and terms of any composition or scheme are determined by the debtor and the creditors, assisted by an insolvency practitioner—called the nominee before approval of the IVA, and the supervisor afterwards. IVAs are put forward when an individual faces financial difficulty, and may often follow the presentation—or the threatened presentation—of a bankruptcy petition, or be advanced to head off a threatened petition. The usual objective of an IVA is the discharge of liabilities without resorting to bankruptcy, thereby avoiding the stigma and the restrictions that bankruptcy brings. It is also open to a person who is already bankrupt to put forward an IVA, if they so choose to do so...

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Web page updated on 21/05/2026

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