Anger over the withdrawal of SIVA

The Insolvency Service dropped a bombshell last week, deciding to withdraw
simplified individual voluntary arrangements proposals targeted at the UK’s
poorest debtors.

The Insolvency Service has said the IVA Protocol introduced earlier this year
proved robust enough not to require a separate SIVA category.

IPs were quick to condemn the removal of the legislation, which would have
seen the arrangements made available to the public in spring 2009.

‘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

‘Now they will be pushed towards unofficial, unregulated debt solutions or
bankruptcy,’ said Graham Rumney CEO of R3, the trade body for insolvency

SIVAs would have been aimed at people with debts of less than £75,000. Rumney
described them as ‘the indebted poor,’ usually on a low income who would find it
hard to pay back this amount of debt.

Only 50% of creditors would have been needed to agree a SIVA, compared to 75%
of creditors by value who must currently approve an IVA. SIVAs would also have
been cheaper to set up.

‘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 Rumney.

To qualify for the IVA, individuals must meet a number of criteria, such as
having a regular income and
three lines of credit from two or more creditors.

However, unemployed people or individuals who have more than 20-25% of their
income coming from benefits or those with disputed debts would not be in line
for a straightforward IVA because their circumstances made them ‘unsuitable for
the application of the protocol,’ the protocol document said.

The Debt Resolution Forum said: ‘The IVA Protocol is of great benefit to
all, but especially the banks in that it has driven down IVA fees,’ said DRF
chairman David Mond.

‘A huge opportunity has been missed to offer affordable and well regulated
debt relief to the hundreds of thousands who will need it as the credit crunch
bites. The banks will benefit from this decision ­ not the struggling consumer.’

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