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Key Activities - Individual Voluntary Arrangements

In July, at a specially convened Seminar, the Insolvency Service presented the findings of the research carried out in 2002 by Michael Green, Research Fellow at the University of Wales into IVAs.

Following the Seminar, the IS decided to set up a working group to consider the IPC
recommendation that there could be a simpler, less expensive form of IVA to serve the needs of the personal debtor. The current IVA was introduced in 1986; primarily to serve the needs of the small unincorporated business. This still applies but the dramatic increase in the number of IVAs is attributable to the current high level of over-indebtedness amongst ‘consumer debtors’.

The working group, made up of representatives of some of the organisations that handle the greatest number of IVAs is making good progress. The IPC had an exchange of views with the IS about the work of the group in December and will be included in the consultation process when the first report of the working group’s report is published later in 2005. The IPC supports the view that there is scope for a simpler and less expensive process for dealing with those situations where avoidance of bankruptcy is better for both debtors and creditors.

Following our recommendation of 2002 – ‘The JIC should obtain details of VAs on an annual basis to enable performance tables to be completed etc’ (see page 11) the profession commissioned further research by Michael Green with our recommendation as his remit.

The details of his research will be released in April 2005. The main point at issue is whether the RPBs and the JIC at present get sufficient and sufficiently timely information about the outcome of IVAs to monitor whether debtors and creditors are always receiving best advice from all practitioners who act as Nominees and Supervisors in VAs. This issue is discussed in more detail in our recommendation on statistical information on pages 7 and 8 above.

The following table (updated from 2003) shows the numbers of IVAs and bankruptcies over the past decade. The significant rise (approximately 25%) in both IVAs and bankruptcies confirms the need for the processes to be regularly reviewed to see if they match the present day needs.

In addition to our recommendation on statistical information, the IPC also believes that the
requirement on IPs to give ‘best advice’ to individual debtors on the options open to them has become more important with the entry into force of the Enterprise Act 2002 and the proposed changes to the IVA. Our third recommendation on Page 9 accordingly proposes that IPs should give debtors a reasoned written recommendation as to which option is most appropriate for their circumstances.

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