Byline: Susan Byrne
Due to the change in bankruptcy legislation, there has been a huge increase in the number of personal insolvencies.
IVA factories have contributed to this significant increase in the presentation of Individual Voluntary Arrangements but there is concern within the industry that some people are entering into IVAs which are not necessarily a suitable solution.
An IVA is a legally binding contract between a debtor and his or her creditors.
Insolvency Service statistics show that there were 26,072 individual insolvencies in England and Wales in the third quarter of 2007.
This was made up of 15,833 bankruptcies - a decrease of 2.1 per cent on the previous quarter and an increase of 2.2 per cent% on the corresponding quarter of the previous year - and 10,239 IVAs, a decrease of 4.3 per cent on the previous quarter and a decrease of 14.3 per cent on the corresponding quarter of the previous year.
The Tribunal Courts and Enforcement Act 2007, which should come brought into force in April next year, contains a new insolvency procedure is called the Debt Relief Order.
This will be administered by the Insolvency Service, a government agency for those who fall into debt and are unable to access bankruptcy or other debt resolution procedures.
In January 2007, the Insolvency Service assembled a broad range of stakeholders to consider how to achieve greater acceptance of IVAs by banks and credit card companies, who are increasingly placing hurdles and their own criteria in the way of debtors.
The outcome is the new IVA Protocol-Compliant.
It is expected to inform and influence the approach of insolvency practitioners and creditors to "straightforward consumer debtor proposals" which should provide a basis for quicker, more streamlined preparation and submission of IVAs to creditors who, in turn, should agree and accept them "as submitted".
The intention is to:
An IVA proposed by a debtor through an IP that satisfies the legislative requirements and those of the protocol will be acceptable to creditors who are a party to the protocol and will vote accordingly
Should a protocol-compliant proposal be rejected by one or more creditors then the debtor and nominee are entitled to know the reason(s) for rejection, and may pursue a complaint through the creditor's published complaints procedure and then with its regulators
Creditors who consider a proposal submitted to them that is described as "protocol-compliant" is in fact non-compliant can pursue the matter with the IP and then with his or her regulatory body. …