IVA proposals can only be put together and presented to an individuals creditors by a licensed Insolvency Practitioner. At the time of this writing there are only about 2000 licensed Insolvency Practitioners in the UK.
The Individual Voluntary Arrangement was originally designed to provide relief to debts generated as a result of business insolvency. In recent years, increasing levels of consumer debt has led to many insolvent individuals with non-business generated debts seeking the legal protection offered within an IVA.
This increased activity has resulted in proposals to restructure the current IVA legislation in order to address shortcomings within the current IVA regime. The Insolvency Service set up a Working Party of stakeholders to discuss and consider how and what improvements should be made to balance the needs of both the creditor and debtor. This consultation process resulted in the proposal for an introduction of an enhanced IVA regime to build upon the current legislation.
Essentially, it has been proposed that the current IVA structure should remain to cater for business trader debts and more complicated cases. However, the need for a two tier Simple IVA (SIVA) mechanism has been outlined.
Here an individual with debts of less than £25,000/£30,000 would be eligible for the proposed Simple IVA 1 (SIVA 1). An individual in such circumstances would be able to enter into this arrangement without creditors voting on the proposal so long as the return in the SIVA 1 would be better than bankruptcy.
The SIVA 2 arrangement would cater for individuals with debts of £25,000/£30,000 but not higher than £75,000. In such circumstances an individual’s creditors would be able to vote for or against the proposal but would not be able to attach any modifications to the arrangement. The acceptance of the SIVA 2 would be based on a simple majority of debt vote as opposed to the current 75% requirement that constitutes the current IVA legislation.
It is anticipated that these legislative changed will be introduced at the end of 2006 or early 2007.
Tags: consultation process, consumer debt, creditor, creditors, debtor, debts, improvements, individual voluntary arrangement, insolvency practitioner, insolvency service, legislation, licensed insolvency practitioners, proposal, proposals, regime, shortcomings, siva, stakeholders
