An IVA or SIVA?
  

First we had the IVA and now we have the SIVA, or Simple IVA. The SIVA is likely to replace the existing type of IVA. Here we outline the major differences between the two and how it will affect potential applicants.

When the IVA was first launched by the Government in 1986 its main purpose was an alternative to bankruptcy for business people. However changes in the economy along with increased consumer spending trends and reliance on easily available credit pushed personal debt sky high. As a direct result, the use of the IVA became increasingly popular with consumers as well as business people.

Due to the recent demand for the use of the IVA by private individuals, which has been further increased by heavy marketing on TV and in the press the government has had to rethink the IVA process as a whole. They were tasked with developing an alternative, which are better-suited for consumer applicants. The suggested solution is to keep the existing style IVA for use amongst business applicants and introduce a brand new 2 tier IVA to consumers.

The new IVA process will now be known as the SIVA or Simple IVA. The main differences between both types of IVA are determined in the individual's level of debt criteria. To qualify for the 1st tier, or SIVA, consumer applicants will need to have a total of unsecured debt of £25,000 or less. An SIVA 2 will require consumer applicants to be in debt by more than £25,000 but less the debt ceiling of £75,000.

The other major difference is the way in which the proposal is approved. The current IVA condition stipulates that at least 75% of all creditors must vote in favour of the IVA proposal. With the new SIVA 1 this is no longer a pre-requisite, so long as the individual can be identified as a potential bankruptcy candidate. With an SIVA 2, the voting process will still form the basis of approval, however only 51 % (as opposed to 75%) will need to be in favour.
The start of the new IVA schemes have yet to be formally announced but it is highly likely that they will start in Q3 of 2007.

Summary

This change in legislation will not have any real difference in the initial start of the IVA process, but rather it concentrates on the amount of debt the applicant owes its creditors. Once the IVA scheme is active, an applicant will qualify for the most appropriate SIVA stage and the new term IVA will by default refer to the new IVA process.

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