Press Release
Yesterday’s announcement by the Insolvency Service that Simplified IVAs (SIVAs) due in April 2009 will now be scrapped, means debtors will lose out, says R3 the insolvency trade body
SIVAs were proposed as a ‘third option’ to bankruptcy and ‘normal’ IVAs, aimed at debtors of less than £75,000 and a group one might call ‘the indebted poor,’ usually on a low income and who would find it hard to pay back this amount of debt. With only 50% of creditors needed to agree a SIVA as planned (currently 75% of creditors by value must approve an IVA), and with reduced costs, this was a solution designed very much with the debtor in mind.
“Scrapping the proposed SIVAs leaves a whole swathe of personal debtors with fewer options,” said Graham Rumney, CEO of R3. “Given recent increases in personal insolvency, which may not peak until 2012, the timing of this withdrawl is counter-intuitive. If introduced, SIVAs would have provided an opportunity to bring a debtor’s affairs within a statutory framework for repayment which now he or she may not have access to.”
It was expected that thousands of personal debtors could have avoided unregulated Debt Management Plans (DMPs), which are unofficial, but formalised agreements between an individual who is in financial strife and their creditors. DMPs can last up to ten years or longer and do not show up in the government’s official quarterly insolvency statistics.
“To illustrate the point, say a debtor had £30,000 worth of debt and was only able to repay 25% of that, he or she could have been eligible for a SIVA. Low income and low dividend debtors are increasingly being denied an IVA as a result of concerted bank action. Now they will be pushed towards unofficial, unregulated debt solutions or bankruptcy,” said Rumney.
R3 calls on the Government to find time to introduce the SIVAs as originally planned or reflect on how this group of ‘indebted poor’, which is only set to grow, can be accommodated under the current insolvency regime.
SIVAs were proposed as a ‘third option’ to bankruptcy and ‘normal’ IVAs, aimed at debtors of less than £75,000 and a group one might call ‘the indebted poor,’ usually on a low income and who would find it hard to pay back this amount of debt. With only 50% of creditors needed to agree a SIVA as planned (currently 75% of creditors by value must approve an IVA), and with reduced costs, this was a solution designed very much with the debtor in mind.
“Scrapping the proposed SIVAs leaves a whole swathe of personal debtors with fewer options,” said Graham Rumney, CEO of R3. “Given recent increases in personal insolvency, which may not peak until 2012, the timing of this withdrawl is counter-intuitive. If introduced, SIVAs would have provided an opportunity to bring a debtor’s affairs within a statutory framework for repayment which now he or she may not have access to.”
It was expected that thousands of personal debtors could have avoided unregulated Debt Management Plans (DMPs), which are unofficial, but formalised agreements between an individual who is in financial strife and their creditors. DMPs can last up to ten years or longer and do not show up in the government’s official quarterly insolvency statistics.
“To illustrate the point, say a debtor had £30,000 worth of debt and was only able to repay 25% of that, he or she could have been eligible for a SIVA. Low income and low dividend debtors are increasingly being denied an IVA as a result of concerted bank action. Now they will be pushed towards unofficial, unregulated debt solutions or bankruptcy,” said Rumney.
R3 calls on the Government to find time to introduce the SIVAs as originally planned or reflect on how this group of ‘indebted poor’, which is only set to grow, can be accommodated under the current insolvency regime.
