Despite continued claims by consumer advocates, including Myvesta UK, that arbitrary rejection rates for returns in an IVA by certain creditors create an un-level playing field for consumers, they continue.

An Individual Voluntary Arrangement should be a fair and reasonable repayment proposal reviewed and submitted by a licensed Insolvency Practitioner that demonstrates that the debtor would be able to repay more to their creditors through a mutually agreed repayment plan than through bankruptcy.

Society in general frowns upon people that they feel just walk away from their debt in bankruptcy in the UK. The reality today is that while people are trying to repay their debt through a fair, reasonable and sustainable approach, creditors are setting arbitrary repayment quotas and agreeing to accept nothing in bankruptcy rather than something in an IVA.

The most fair and reasonable repayment solution for consumers is one where the available monthly income after mandatory expenses and fair allowances is divided among the creditors by repaying each creditor a percentage each month that is equal to their level of debt. For example, if creditor A is 50% of the total unsecured debt owed then creditor A would receive 50% of the monthly funds available for repayment.

Logic would tell us that this is the most reasonable approach to repaying problem debt. The issue today with Individual Voluntary Arrangements is that a creditor that is owed a large share or is proactive to vote for an IVA, when others don't, can cause an IVA to be rejected, leaving the debtor stranded and driving debtors needlessly to bankruptcy.

A good example of these hurdle rates in IVAs can be found below:

Creditor Repayment Rates for IVA Acceptance
HSBC £0.40 in £
Northern Rock £0.45 in £
Student Loans Co £0.90 in £
Link Financial £0.60 - £0.70 in £1

These rates, from actual IVA rejected cases by a wide pool of Insolvency Practitioners demonstrates that creditors like HSBC will simply reject repayment offers where debtors are unable to repay at least 40 per cent of the debt owed over a five year period of time. Other creditors, like Student Loans Co set the hurdle rate even higher.

These repayment rates that lead to the rejection of perfectly good repayment offers appear to damage consumers. It appears that consumers that have had repayment proposals rejected by these "out of the blue" repayment obstacles would have a reasonable case of pursuing creditors for damages because they were essentially forced to go bankrupt when their reasonable repayment arrangement had been refused.

Creditors have certainly been under pressure due to recent issues with bank charges and payment protection insurance. If these capricious rejections of IVAs continue it seems logical that the Office of Fair Trading (OFT) and the Financial Ombudsman Service (FOS) should draw their attention to this issue in the near future.

Just on face value it seems that the implementation and enforcement of discretionary percentages in the repayment of debt would be a clear violation of the EU and UK value of Treating Your Customers Fairly and certainly a clear violation of important sections of the British Bankers Association code that lenders subscribe to. Apparently the BBA remains unconcerned of these clear violations of its voluntary code by its members and that would lead one to believe that the British Banking Code of Conduct is meaningless and without substance if lenders can elect to disregard important sections of the code when it best suits them.

Sadly it appears that certain lenders seem to view consumers as disposable units in times of financial trouble rather than considering each repayment arrangement individually, treating customers fairly and allowing people to repay what they can reasonably afford to over a five year period of time.