Annual Report 2008

Recommendations -Individual Voluntary Arrangements

Although the IVA Protocol agreed last year between the insolvency profession and the major creditors represented by the British Bankers’ Association is now working reasonably well, there is still a concern shared by IVA providers, insolvency regulators and the Citizens Advice Bureaux that debtors with debts in the range of £15,000 to £25,000, who can only afford to make monthly repayments of less than £200, are finding it difficult to get an IVA, because the new fee structure imposed by some of the creditors makes it uneconomic for IPs to handle such cases. Against this background we make the following recommendations:-

• The Insolvency Service and the insolvency regulators should monitor the IVA market to determine whether debtors, who can only make modest monthly repayments, are being unreasonably refused IVAs. If this gap is shown to exist, the Government should put pressure on creditors to allow such IVAs to be adopted, if necessary using more flexible fee structures where the IVAs are likely to provide a better return than bankruptcy;
• The Insolvency Service should take the earliest legislative opportunity to reintroduce the substance of their proposals for Simplified IVAs. We understand that the Insolvency Service is planning to use secondary legislation to remove the current requirement on IPs to register IVAs with the court and to authorise insolvency regulators to license IPs who are qualified only to handle IVAs. In addition, the Government should initiate primary legislation to reduce the majority required to approve an IVA from 75% to 50% of the weighted creditors’ votes. These measures should reduce the costs of IVAs and make it easier to get them approved by creditors;
• The insolvency regulators should monitor the advice given by IPs to satisfy themselves that debtors, who have insufficient surplus income to repay their debts within a reasonable period and for whom statutory debt relief is therefore justified, are appropriately advised about the option of bankruptcy; and
• The Insolvency Service should proceed with its proposal to publish regular aggregate statistics on the failure rates of IVAs. It should also provide the RPBs with regular IVA failure statistics for each licensed IP to help them focus their monitoring. The Insolvency Service should also carry out further survey research into the reasons for IVAs failing.