Grant Thornton Welcome Proposed Simplification of Individual Voluntary Arrangements
Leading business and financial advisers, Grant Thornton today welcome the response to Government plans that will make it easier for heavily indebted consumers to take out Individual Voluntary Arrangements (IVAs), which are an alternative to bankruptcy and debt management plans.
The government today formally published the responses to the Insolvency Service's Working Party consultation recommending a Simple IVA (SIVA). The SIVA is designed to speed up and simplify the process of applying for an IVA, which will make the debt repayment programme more accessible for debt-laden consumers. It is expected that the Insolvency Party's proposals will become law in Autumn 2007.
For an existing IVA to be approved, three quarters of the value of the creditors' voting must be agreed to enter the proposal. New legislation means that this figure will be reduced to 50.1% (or the majority of the creditors) for people with debts up to £75,000. The Working Party consultation also proposed the introduction of a second SIVA (SIVA 2) for people with debts below £25,000. However, the second SIVA will not be implemented for fears that another set of legislation would complicate matters.
Mark Allen, partner within Grant Thornton's personal insolvency practice commented: "As a member of the Insolvency Service's Working Party, I welcome the consultation responses which will ensure that both the creditor and the consumer get a fair deal."
"IVAs offer a less severe form of debt maintenance than a debt management programme, and they mitigate the stigma associated with bankruptcy. An IVA arrangement usually lasts for five years, during which time an insolvency practitioner will take the surplus of the client's salary and distribute it among creditors on a pro-rata basis. When it expires, the rest of the debt is written off. If an individual enters a debt management programme they are generally tied to the scheme for three times the length of an IVA, and there is no guarantee that their home will be safeguarded during this timeframe," he continued.
"As UK personal insolvencies reach epic proportions, the simplification of IVAs will doubtless be a welcome relief for many who find themselves burdened with unmanageable and seemingly insurmountable debts," Allen concluded.
During 2005, there were 67,580* personal insolvencies, of which 20,293 were IVAs. During the final quarter of 2005 there were 6,960 IVAs which represents an increase of 23.9% on the previous quarter and an increase of 117.1% on the corresponding quarter of the previous year.
Grant Thornton Website, March 3rd
The government today formally published the responses to the Insolvency Service's Working Party consultation recommending a Simple IVA (SIVA). The SIVA is designed to speed up and simplify the process of applying for an IVA, which will make the debt repayment programme more accessible for debt-laden consumers. It is expected that the Insolvency Party's proposals will become law in Autumn 2007.
For an existing IVA to be approved, three quarters of the value of the creditors' voting must be agreed to enter the proposal. New legislation means that this figure will be reduced to 50.1% (or the majority of the creditors) for people with debts up to £75,000. The Working Party consultation also proposed the introduction of a second SIVA (SIVA 2) for people with debts below £25,000. However, the second SIVA will not be implemented for fears that another set of legislation would complicate matters.
Mark Allen, partner within Grant Thornton's personal insolvency practice commented: "As a member of the Insolvency Service's Working Party, I welcome the consultation responses which will ensure that both the creditor and the consumer get a fair deal."
"IVAs offer a less severe form of debt maintenance than a debt management programme, and they mitigate the stigma associated with bankruptcy. An IVA arrangement usually lasts for five years, during which time an insolvency practitioner will take the surplus of the client's salary and distribute it among creditors on a pro-rata basis. When it expires, the rest of the debt is written off. If an individual enters a debt management programme they are generally tied to the scheme for three times the length of an IVA, and there is no guarantee that their home will be safeguarded during this timeframe," he continued.
"As UK personal insolvencies reach epic proportions, the simplification of IVAs will doubtless be a welcome relief for many who find themselves burdened with unmanageable and seemingly insurmountable debts," Allen concluded.
During 2005, there were 67,580* personal insolvencies, of which 20,293 were IVAs. During the final quarter of 2005 there were 6,960 IVAs which represents an increase of 23.9% on the previous quarter and an increase of 117.1% on the corresponding quarter of the previous year.
Grant Thornton Website, March 3rd
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3/07/2006 01:11:00 pm
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