Ditch your debt
The Government is set to reveal plans to make it easier for people to take out Individual Voluntary Arrangements (IVAs), rather than apply for bankruptcy. Mike Collins reports
Mindful of the UK’s growing debt problem, the Government is planning to introduce a ‘Simple IVA’ by the end of the year to help more people to apply for the debt repayment programme rather than having them forced into bankruptcy.
At the moment, creditors responsible for 75% of the value of an individual’s debt have to give approval if an IVA is to be offered to debtors. This is expected to be reduced to 51% for those with debts under £75,000.
However, proposals to introduce another tier of IVA, which would have allowed anyone with debts under £25,000 to be automatically approved for an IVA, have been scotched.
The law relating to IVAs at the moment has its roots in the 1986 Insolvency Act and was initially designed to resolve the complex debts generated by businesspeople and entrepreneurs. But with the UK’s debt mountain now topping £1 trillion, ordinary consumers are increasingly utilising the facility.
Financial adviser Martin Cunningham said: “It’s about time the legislation was changed as more than 47,000 people declared themselves bankrupt last year, and the economy could be damaged if this rate was to continue or even accelerate, as it seems to be doing.
“It is important to simplify the process and start reversing the damage done to the wealth of the nation by years of easy credit. The Government, along with the lenders, must do its bit in reducing the scale and severity of the debt problem,” he concluded.