Insolvency Service
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Proposed changes to individual voluntary arrangements (IVAs)
The Insolvency Service began a 12 week consultation process today looking at proposals to simplify Individual Voluntary Arrangements (IVAs).
Proposals to simplify the current process for those with undisputed debts of less than £75,000 include approval of an IVA by a simple majority vote, creditors not being able to change the debtors proposals and creditors having to file their claims within 90 days. There are also proposals to reduce the administrative burden and on Insolvency Practitioners (IPs) who supervise IVAs ultimately reducing the administrative cost to the debtors.
IVAs were introduced just over 20 years ago under the 1986 Insolvency Act to provide a flexible debt resolution alternative to bankruptcy for professionals and company directors, supervised by Insolvency Practitioners (IP). They provided debtors with the certainty of making reasonable payments over a set period of time while providing maximum returns to creditors. Since their introduction IPs have continued to supervise IVAs but a growing number of people in full time jobs with debts take up them up as a means of managing their debts.
The consultation ends on the 3rd August 2007. Full details of the consultation document can be found on the Insolvency Service website http://www.insolvency.gov.uk
Notes to Editors
1. Individual Voluntary Arrangements (IVAs) were introduced by Insolvency Act 1986 following the Cork Review in 1982 where it was recognised that a flexible alternative to bankruptcy was needed for company directors, members of professions and traders to address their complex financial affairs.
2. IVAs are available to all individuals. They can last for a period of upto 5 years and must be supervised by an Insolvency Practitioner. The simplified regime will only be available to debtors with undisputed debts of less than £75,000. The current regime will remain in place for those with debts of more than £75,000. The PriceWaterhouseCoopers report 'Living on Tick' shows that over 90% of IVAs were entered into by those in employment. According to KPMG, in 2005 approximately 80% of all IVAs had unsecured liabilities of £75,000 or less which would enable them to apply for the entry to the new procedure.
3. Earlier on this the year, The Insolvency Service and the British Bankers Association co-chaired by a forum (hosted by KPMG). Delegates included creditors, insolvency practitioners, debt advisors and academics. The forum showed their continuing support for IVAs and reiterated that the current system needed review to reduce the complexities of the system and the administrative burden.
4. In 2001 there were 6,298 IVAs and in 2006 there were 44,332. The shows that an increasing number of people are continuing to take steps to manage their debts effectively and give creditors better returns.
5. The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent.
6. The Insolvency Service carries out confidential enquiries on behalf of the Secretary of State for Trade and Industry through Companies Investigation Branch. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.
Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk
