Published in IVA Focus Features on Wednesday, January 31 2007

The SIVA is a Simple Individual Voluntary Arrangement. It is a new alternative to the current Individual Voluntary Arrangement. IVA’s came into existence in 1986 as part of the 1986 Insolvency Act, and at the time it was expected mainly to be used by business men and women who were in debt, but didn’t want to go into bankruptcy, however there has been a massive increase in the number of non-business people using the IVA to get debt free. This growth has meant the IVA has had to have been assessed for what changes may need to be made to make it more suitable for non business individuals. And this meant the introduction of the SIVA. It is likely to be introduced around the end of 2007.

It now means there is a two tier system in place. The SIVA 1 will deal with debts under £25000 - £30000, the SIVA 2 will deal with debts of between £25000 and £30000 and up to £75000. The current IVA will still be available for individuals. The SIVA will still be assessed on pretty much the same criteria, and will still rely on you having some disposable income to pay into the SIVA so that the creditors will get more back through a SIVA than in bankruptcy if bankruptcy provided a greater return, unfortunately it would have to be considered instead of a SIVA. One of the main differences of this system is the fact that you cannot enter a SIVA with more than £75000 of debt.

For those of you who will be eligible for a SIVA 1 (£25000 - £30000 and under in debts), this system has been greatly improved to lead to your SIVA being accepted where perhaps if you had gone for an IVA in the past you would have been rejected. With the previous system IVA’s were voted on by the creditors and often rejected (you must receive more than 75% of the vote from the creditors for your IVA to be accepted) because generally people with under £30000 of debt had less creditors (so each creditor held a higher percentage of the vote), the creditors weren’t getting a great return in comparison to the expenses of going into a an IVA. It is proposed that the SIVA 1 will not have to be voted on by the creditors, although the individual applying for the SIVA must pay more back in the SIVA than they would in bankruptcy, and must pay the maximum they can afford each month (worked out on a detailed income and expenditure this isn’t something to worry about as the Government and creditors aren’t looking to financially cripple you, they would prefer the plan to be sustainable in order for it to be completed and ensure a high return). This will lead to reduced costs and mean the creditors will get more money back than in the previous IVA. The creditors are going to have to put a great deal of trust in the Nominee (the person who puts you forward for the SIVA) as it is the Nominee who will assess the income and expenditure and ensure the creditors get a fair payment. It is thought that there will be a standardised allowance for key elements of the expenditure to make it as fair as possible.

The SIVA 2 is for individuals in over £25000 to £30000, but up to a maximum of £75000. It will operate in almost the same way and with the same criteria as the SIVA 1, however the creditors do get to have a vote to decide if they accept the SIVA 2 or not. It is thought that this will be made simpler by no physical meeting actually taking place and the creditors voting in writing for example. It is also thought that the you won’t need to get as much of the vote ( the current IVA states you have to get 75% of the vote for it to be passed), which should make it easier for the SIVA 2 to be accepted.

The idea behind this new scheme is to streamline the who system and make it simpler, hence the name Simple IVA. If any case started as a SIVA 1 case and the debtor was found to have more debts, it could be transferred into a SIVA 2 case. However once accepted the proposal (contract or terms of your SIVA) for a SIVA 1 or 2 cannot be modified. They should still generally last for five years and there is no minimum amount required to be paid back (as long as it is more than what would be returned in bankruptcy). If the SIVA failed for any reason you cannot apply for either a SIVA 1 or 2 for six years, although you could still apply for an IVA.