New Protocol SCIVA - Report from the IVA Forum
If you are thinking of proposing an IVA to sort your out your debts then read this news article on the new Protocol SCIVA 'Standard Consumer Individual Voluntary Arrangement' launched from 1st February 2008.
I am supportive of the new SCIVA but have one or two concerns.
I was present at the meeting on the 29th January 2008 whereby it was agreed to implement the 'Protocol SCIVA' and voiced my concerns to the floor that in the past creditors have not supported debtors that were in financial difficulty. I pointed out that there was a danger that if this continues then bankruptcy could well be seen as the most realistic solution available to debtors to resolve their debt problems.
I have also have several concerns about the way the industry has developed over the past 18 months and I am not confident that the proposed 'Protocol SCIVA' will work immediately. My reasons are as a follows;
- The 'Protocol SCIVA' is a voluntary code and creditors are not legally bound by it.
- The Insolvency Exchange (TIX) that represent a lot of creditors when voting at IVA meetings have said they are looking for confidence and trust to grow within the debt management industry. They said that they aim to remove hurdle rates as this confidence grows. Their last word was that although modifications will be a thing of the past they are still likely to add three in order to cover fees and dividend payment distribution to creditors in effect still controlling the 'Protocol SCIVA'.
- There were no debtors consulted in any of the working groups and this Protocol is all about the consumer that cannot cope with their debts.
- CCCS a major debt management company will not be offering the 'Protocol SCIVA' to existing clients that are already in long term debt repayment programmes, some of the plans are in excess of 10 years duration. Why are they denying the right to an overstretched debtor? Click here to read up on the pros and cons of debt management companies.
- The expenditure figures that CCCS use will be incorporated into the 'Protocol SCIVA'. Many clients tell me that they do not have enough allowance to live on month by month. They claim it is unworkable and that there is no incentive to carry on with the plan which can run for many years.
- In an IVA, 100% of the disposable income is taken, unlike in a bankruptcy whereby the Official Receiver (OR) in most cases will take only 50 to 75 % of the disposal income.
- Research carried out at the meeting suggests that as many as 20,000 debtors may have been denied access to an IVA due to hurdle rates set too high by creditors and the flagrant rejection by Northern Rock over the past 18 months on all IVAs when they had the deciding vote.
There is unrest among many Insolvency Practitioners, (IP's), in that they resent being told what to do by an unregulated group, The Insolvency Exchange. The IP's claim they are having to do more work than before and with a large reduction on their fees.
If the 'Protocol SCIVA' becomes a success and hurdle rates and modifications are removed it is inevitable that the number of IVAs will increase year on year. I agree that the industry needed tidying up in the way that IVAs were previously advertised to the debtor and the IVAs in general needed revising. What I would like to see now is for the lenders and credit card providers to tidy their own back yard in the way they advertise credit and the lack of support they give when a debtor is in financial difficulty.
Read the SCIVA article.
More in depth details can be found here: http://www.insolvency.gov.uk/...