Businesses and individuals could have their insolvencies signed off by professionals with only a fraction of the experience currently required, under new government proposals.

The proposals are stoking fears of a reckless dilution of the current regulatory climate and have set the government on a collision course with one of the major professional bodies for the insolvency industry, the Insolvency Practitioners Association (IPA).

Currently fully-licensed insolvency practitioners require 4,000 hours experience. IPA director general Peter Joyce claims the insolvency service is considering a figure of around 400 hours’ experience for a proposed qualification dubbed an ‘insolvency-lite’.

The IPA has warned that the moves could lead to reckless decision-making on behalf of debtors and might incite banks to force them into bankruptcy. It argues a minimum of around 2,000 hours will be necessary for the new qualification.

The IPA and the ICAEW have recently looked into providing the new qualifications, but the Insolvency Service’s willingness to set a low benchmark has worried the IPA.

Joyce warned that major creditors could baulk at debt plans proposed by an administrator if they believe the administrator has made an uninformed decision.

The proposals follow soaring personal insolvencies on the back of government legislation making it easier to enter formal debt proceedings. The Insolvency Service also launched a paper last week outlining ‘simple’ IVAs, for those with debts less than £75,000.

A SIVA would not include a creditors’ meeting, and a majority of creditors would have to agree to a debt proposal as opposed to 75% for regular IVAs.

‘[Creditors may] feel with a SIVA – where there’s no meeting of creditors – that in the present climate [of also introducing a lighter qualification] they might turn their faces to debt proposals. If we don’t square this, there must be a risk that debtors will have to go for the more complicated route (IVA) or go into bankruptcy,’ said Joyce.

A spokeswoman for the Insolvency Service said practitioners undertaking just voluntary arrangements would not need the same knowledge and experience as an insolvency practitioner who deals with all types of debt appointments.

The ‘insolvency-lite’ practitioner, known as a voluntary arrangement practitioner, would need to demonstrate they had ‘at least’ the same depth of academic knowledge as an existing insolvency practitioner, she added.