Government blasted over ‘insolvency-lite’ proposals

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

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

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.

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