Speaking to Reuters, Mike Norris, director of policy at the Insolvency Service, said that the move should help consumers avoid bankruptcy.
“By keeping people out of bankruptcy
and, where appropriate, getting them into Simplified IVAs, we would expect to see better returns for creditors,” Mr Norris said.
“That’s both in general terms, as the returns in IVAsare significantly higher in IVAsthan bankruptcy and more specifically, as we would expect to see lower costs in Simplified IVAsthan in ‘standard’ IVAs.”
Simplifying IVAs should offer debtors more options and banks are likely to approve of the changes as the arrangements allow consumers to clear debt and repay banks.
According to the article, SIVAs will have less bureaucracy than existing IVAs and will eventually account for 80 per cent of the IVA market.
However, David Mond, CEO of IVA providers ClearDebt, said: “This is too little too late the SIVA is a potential lifeline for many thousands of debtors and should also force IVA fees down, producing better returns for creditors and allowing debtors with lower debts and smaller incomes to benefit from the debt-forgiveness of an IVA, rather than the uncertain debt management plans that hundreds of thousands mistakenly choose every year.
“SIVAs have been in discussion since 2005 – it’s not acceptable that thousands of debtors should wait until 2008 for the relief they can provide.”