This may be of interest.
Issue 03 December 2006
Introduction
Dear Reader
Welcome to this, the third edition
of Insolvency Service News.
IVAs subject to ongoing reviews
Dealing with debt
The number of Individual Voluntary Arrangements
(IVAs) increased again this quarter, as more people
choose this alternative to personal bankruptcy as a way
of dealing with their debt. IVAs are legally binding
arrangements between debtors and creditors to pay
back all or part of their debt, via contributions from
income and the realisation of assets, usually over a
period of five years, and might include the selling or
remortgaging of a home. Although some IVAs repay
the debt in full, they normally contain a measure of
debt forgiveness.
Proposals to simplify IVAs and cut the costs of their
administration have been prepared by the IVA
Stakeholder Group and should be in force by the end of
2008. The main proposal is for a single simplified IVA
system for unsecured and undisputed debt up to
£75,000. Creditors may vote to accept or reject an IVA,
but not to modify its terms. A simple majority in value of
creditors will decide, replacing the existing
requirement for 75% of creditors by value to agree. A
‘paper’ vote, rather than a physical meeting, will reduce
costs. The existing system will
remain in place for more complex
cases and higher level of debts.
Meanwhile, discussions are also
under way in regards to the
monitoring of IVA providers.
IVAs are arranged by Insolvency
Practitioners (IPs) who are
regulated by one of seven
Recognised Professional Bodies
(RPBs). Around 90 of the 1800 IPs
in the country are regulated by the
Secretary of State through The
Insolvency Service.
IPs have to abide by Statements
of Insolvency Practice which are
agreed by the Joint Insolvency
Committee on which all the
regulatory bodies are represented.
Under an agreement with the
Secretary of State the regulatory
bodies monitor their Insolvency Practitioners and
guidelines suggest that each IP should be visited every
three years, depending on the risk.
Following the rapid growth in IVAs and the
emergence of volume IVA providers over the last two
years, the Joint Insolvency Committee is considering
the measures in place to make sure the monitoring
process is flexible enough to deal with IPs handling
many cases each
year – sometimes in
the high hundreds –
and the special
issues that arise
with IVAs.
Although
ultimately the IVA is
“signed off” by an IP,
a lot of the initial
interviewing of
debtors is done by
IP staff, and it is
essential to ensure
that they are
properly trained, and
that there are
sufficient checks and balances to ensure IVAs can be
dealt with on a volume basis.
“It is not in anyone’s interest for an IVA to be
recommended where it is not appropriate to the
debtor,” says Mike Chapman,
Head of IP Regulation at The
Service. “Conversion rates – the
percentage of people who choose
an IVA following their enquiry
about personal insolvency – vary,
but those of some of the volume
providers are relatively low, from
3% to 15%. Volume providers
generally get paid as part of a
debtor’s monthly payments, rather
than an upfront fee, so they are
unlikely to recommend IVAs that
are not feasible and sustainable in
the long-term.”
Another issue under discussion
is the monitoring of debt
management companies, whose
regulation falls into a different
framework. Such companies may
recommend an IVA and refer the
case to an IP, who is regulated under the terms outlined
above. However, they also provide debt management
plans, which are less regulated and have no element of
debt forgiveness for the debtor, who needs to pay their
whole debt, possibly with interest and fees.
For more infomation about IVAs please see ‘Is an IVA
Right for Me?’ at
www.r3.org.uk
Year IVAs
Jan – Sept 06 31,600
2005 20,293
2004 10,752
2003 7,583
2002 6,295
2001 6,298
2000 7,978
Take up of IVAs
“It is not in anyone’s
interest for an IVA to
be recommended where
it is not appropriate to
the debtor.”
Mike Chapman
All I have left is my humour.
