The Simple IVA, or SIVA, is coming. So, what exactly is it?

When IVAs were originally introduced as part of the Insolvency Act 1986, it was expected that their main function would be to offer an alternative to business men and women who had got into debt, but wanted to avoid bankruptcy. However, increasing levels of consumer debt has resulted in a massive increase in the number of non-business individuals opting for an Individual Voluntary Arrangement.

Because of this unexpected growth, the government has begun looking into what improvements would need to be made to make the IVA process more suited to non-business individuals. As a result, the current IVA system will stay in place for business debtors, but a 2-tier system will be introduced to cater for non-business debtors.

This new 2-tier system will be known as the Simple IVA (SIVA) and the tiers will divide according to the amount owed. Under this new scheme, those with debts of less than £25 will be eligible for ‘SIVA 1’ while those with debts of £25-£75k will be eligible for ‘SIVA 2’.

A major difference in the SIVA 1 process is in the way in which the application in approved. With the current IVA system, the success of an individual application depends on a 75% majority of creditors voting in favour of the proposal. With a SIVA 1 application, however, a majority vote is not required, provided the proposal is deemed favourable to bankruptcy. The SIVA 2 arrangement, on the other hand, will continue to require a vote, but the application will be successful if a 51% majority is achieved, rather than 75%.

There is, as yet, no confirmation of exactly when the SIVA will be introduced, but current estimates place the launch date as between late 2006 and early 2007. Exact details may change before plans are finalised.