Over the next few months the simple IVA or SIVA is likely to be introduced, possibly replacing the standard IVA as we know it today. In preparation of its arrival, we define the major differences between an IVA and this all-new, simpler IVA and ask what it means to you as a potential applicant.

When the Government first introduced the IVA in 1986 its primary purpose was to offer business people a viable alternative to bankruptcy. Changes in the economy coupled with increased consumer spending patterns and reliance on credit pushed personal debt through the roof. As a result, the use of the IVA was no longer isolated to business professionals and became increasingly visible among consumers.

Due to the demand for the use of the IVA by private individuals, the government has been forced to rethink the process as a whole and develop an alternative better suited to non-business applicants. The agreed solution is to keep the standard IVA for use among business applicants and introduce a new 2 tier IVA to consumers.

The new process will be known as the SIVA or simple IVA. The main differences are determined in the qualification criteria defined by the individual’s level of debt. To qualify for the 1st tier (SIVA 1), consumers will need to have a total debt of £25,000 or less. SIVA 2 will require consumers to be indebted by more than £25,000 but less than £75,000 (debt Ceiling).

The other notable difference lies within the way in which the proposal is approved. The current IVA scheme stipulates that at least 75 per cent of all creditors vote in favour of the proposal. With SIVA 1 this is no longer a requirement, so long as the individual can be accurately identified as a bankruptcy candidate. With SIVA 2, the voting process will still form the basis of approval, however only 51 per cent (opposed to 75) will need to be in favour.

The exact date as to when the scheme will be officially introduced is unknown, but it is thought that the 3rd quarter of 2007 is a likely prospect.

To summarise, this change in legislation will not directly affect you as far as applying for an IVA is concerned, but is better suited to cater for different levels of debt. Once the scheme is active, you will automatically qualify for the appropriate SIVA stage and the term IVA will by default refer to the new process (For consumers).

Please contact us if you require any further information or advice regarding the SIVA or IVA’s in general